Annual Report 2017 and Sustainability Report

“We build Sweden as a nation of knowledge” Contents Our mission 1 President and Chair of the Board 2 Value creation 5 Focus areas 6 Stakeholders 8 Akademiska Hus: Sweden’s leading builder Materiality analysis 9 Strategy 11 Objectives and objective achievement 12 of sustainable learning environments Employees 14 Case 15 Description of business 21 Akademiska Hus owns, develops and manages Campus and business development 23 properties with a focus on higher education and Projects 24 Property Management 29 research. We are wholly owned by the Swedish state. Market 32 Our property portfolio is worth SEK 80 billion and our share of premises for higher education and research ADMINISTRATION REPORT Trends 34 is approximately 60 per cent in this segment. Customers and contracts 35 Five-year summary 37 Property valuation 38 Financing 39 RESEARCHERS AND STUDENTS SQUARE METRES IN OUR PREMISES EACH DAY RENTABLE SPACE Risk and risk management 42 Corporate Governance Report 46 Board of Directors 49 Executive Management 51 Board of Directors’ Internal Control Report 53 Other information 54 300THOUSAND 3.3MILLION Allocation of unappropriated earnings 55

FINANCIAL STATEMENTS AND NOTES Income Statements 56 Balance Sheets 60 TOTAL PROPERTY PORTFOLIO PROJECT PORTFOLIO Changes in Equity 64 Statements of Cash Flows 66 Notes 68 Signing of the Annual Report 96 Auditor’s Report 97 80SEK BILLION 16.7SEK BILLION SUSTAINABILITY REPORT About the Sustainability Report/GRI data 102 GRI and COP index 104 Assurance Statement 106

KEY FIGURES 107 DEFINITIONS 108 FIVE-YEAR SUMMARY 2017 2016 2015 2014 2013 INFORMATION AND ADDRESSES 108 INCOME STATEMENT, SEK M Property management income 5,806 5,666 5,646 5,681 5,588 Net operating income 3,829 3,667 3,740 3,717 3,506 Change in value, properties 4,979 3,682 2,655 3,529 232 Change in value, financial instruments –242 –241 165 –548 7 PROPERTY SPECIFICATION Profit before tax 8,311 6,714 6,141 6,261 3,275 Available at: Profit for the year 6,453 5,148 4,780 5,215 2,568 akademiskahus.se KEY FIGURES Return on operating capital, % 5.9 6.2 6.9 7.3 7.2 Yield, % 5.5 5.7 6.4 6.9 6.8 Net operating income ratio, % 66 65 66 65 63 Annual Report 2017 Equity ratio, % 43.3 41.4 40.7 48.0 46.8 The audited Annual Report comprises pages 34–95. Our sustainability initiatives are incorporated in the Annual Report and presented in line with GRI G4 guidelines. The Sustainability Report comprises the pages listed on page 102 and has undergone a cursory audit. The Sustainability Report also includes Akademiska Hus’ statutory sustainability report in accordance with Chapter 6 of the Swedish Annual Accounts Act. Akademiska Hus: Sweden’s leading builder of sustainable learning environments Greater social accountability Accelerating digital journey It is important to work with social responsibility in order to We are in the middle of a transformation process regarding contribute to positive social developments and create value for development of our business model, our deliverables and our customers. Consequently, we focus on expanding our social our internal processes. We are already working with several sustainability initiatives in areas such as campus development, fascinating projects that clearly focus on digitisation. One influence within our value chain, and employee culture and example is A Working Lab, an innovation arena on the empowerment. Chalmers campus in Gothenburg. Long-term contracts with High credit rating – creditworthy customers form a requirement for financing our base investments Colleges and universities, which are essentially government We have a substantial investment portfolio. Cash flow from our agencies, are the source of 90 per cent of our revenue. Long-term operating activities is robust, but the debt portfolio will continue contracts and a high leasing level with customers who have the to be substantial. We strive to achieve relevant and transparent highest credit rating create stability. They also create investment disclosure to enable lenders and credit rating agencies to find opportunities so that we can continuously improve our offering. support when they conduct a credit background check on Akademiska Hus.

DISTRIBUTION PREMISES BY CATEGORY, % TENANT CATEGORIES, %

Classrooms and lecture halls, 45% Colleges and universities, 87% Laboratories, 35% Chalmersfastigheter AB, 3% Offices, 14% Publicly financed operations, 4% Other facilities, 6% Other, 6%

NET OPERATING INCOME FAIR VALUE BY CITY, %

SEK m% 4,000 80

Stockholm, 45% 3,000 60 Uppsala, 18% Gothenburg, 9% 2,000 40 Lund, 8% Umeå, 5% 1,000 20 Linköping, 4% Other, 11% 0 0 13 14 15 16 17

Net operating income, SEK m Net operating income ratio, % Akademiska Hus 2017

Important projects underway We have a large project portfolio with many planned and ongoing projects. One of the most important construction starts in 2017 was A Working Lab, an innovation arena for participants in the built environment at the Johanneberg Campus of Chalmers University of Technol- ogy in Gothenburg. In December, the Board of Directors decided to invest about SEK 1.2 billion in an expansion of the Ångström Laboratory in Uppsala. The industry organisation “Håll Nollan” was formed Student accommodation in One of Akademiska Hus’ sustainability goals is to promote an accident-free workplace. An important step in this ini- collaboration and on our own tiative was taken during the year when the Håll Nollan Good access to student accommodation makes the cen- industry organisation became reality. We believe that tres of education more attractive. In our campus plans we collaboration among industry participants is the only always study the need and opportunities for undergradu- path forward to achieve truly safe workplaces. We there- ate and graduate student housing. In 2017 we analysed fore look forward to sharing our knowledge and learning our property holdings and identified land where student from the experiences of others within the Håll Nollan housing could be built in a number of locations all over framework. Read more about Håll Nollan on page 15. Sweden. Our focus over the next few years will continue to be based on our mission to promote construction of as many student housing units as possible. Read more about Humanities Theatre in Uppsala our work with student accommodation on page 17. The sun gives us energy Part of our energy strategy is aimed at increasing the quantity of renewable energy. In 2017 we equipped Naturvetarhuset on the Umeå Campus with an 800-square- metre solar park that produces 120,000 kWh annually. It generates solar energy that provides 20 per cent of the building’s total energy needs for operation. Campus Valla in Linköping has also been equipped with three new solar parks. Read more about our energy initiatives on page 30. Transfer of major Gender equality in the industry In March 2017 Akademiska Hus initiated a collaboration construction projects with the AllBright foundation. We work proactively with Several major construction projects were completed three other property companies to encourage greater during the year and tenants moved in. Some examples gender equality within the industry. To accomplish this include the administration offices in the Segerstedt objective, gender equality will be analysed in-house and Building in Uppsala, the renovated Built Environment all employees will receive training to ensure that they building in Gothenburg, and the Humanities Theatre in understand the company’s core values and thereby be Uppsala, as shown on the cover. Read more about the able to contribute to a good corporate culture. Humanities Theatre on page 20.

Vision Values

Leading knowledge environments. ATTENTIVE Attentiveness and mutual understanding are essential for building strong, long-term relationships.

COMMITTED Business concept Wholeheartedness and commitment are Working in collaboration with our customers, we reflected in everything we do. develop, build and manage knowledge environments that further Sweden’s success as a nation of knowl- VALUE CREATION edge. Through our experience, expertise and size, Together we take overall responsibility for build- we provide effective, sustainable environments for ing lasting success for customers, the owner and education, research and innovation. each other. OUR MISSION – to contribute to strengthening Sweden as a nation of knowledge

“Akademiska Hus Aktiebolag shall own, develop and manage properties for universities and colleges where the primary focus is on education and research and it shall carry on operations compatible therewith. Operations shall be run on a commercial basis and generate a yield that is in line with the market by setting rents that take into account the operating risk. Akademiska Hus Aktiebolag shall work to bring about long-term sustainable development of university and college campuses.”

“Akademiska Hus shall contribute to the creation of more student accommodation by making clear that the Company’s focus includes the construction and management of student accommodation.” AKADEMISKA HUS’ MISSION IS DECIDED BY THE RIKSDAG 2 STATEMENT FROM THE PRESIDENT AND CHAIR OF THE BOARD

We shall be the customers’ first choice With new clear goals and the new organisation, Akademiska Hus shall always be the customers’ first choice, able to stand strong in a comparison with the very best participants in the industry with respect to efficiency and customer experience, according to Board chair Anitra Steen and President Kerstin Lindberg Göransson in a conversation about the events of the past year.

A new organisation became effective on 1 January 2017 outstanding experiences that we can later benefit from in other pro- and during the year it was time for the new organisation jects around the country. to begin to deliver results. How has that gone? AS: For obvious reasons, each university and college focuses on the KLG: We’ve already seen clear evidence that the new organisation activities that occur at the individual centre of education. Akademiska is achieving the positive effects we had expected. The shift from a Hus, which provides the premises where education and research are regional structure to an organisation based on our core processes conducted, have the benefit of an overview of what is happening at a has given us a more uniform approach to our work. Now one person large portion of Sweden’s higher education institutions. This collec- is in charge of projects and another is in charge of administration for tive knowledge benefits all of our customers. the entire country, while three people have overarching responsibility for customer relationship management. This approach results in Digitisation is one of the three areas on which closer and even more dedicated collaboration with our customers, Akademiska Hus has chosen to focus over the next Swedish centres of education. I hope now that we can develop our three years. Another such area is social sustainability. joint undertaking towards a partnership with objectives that we Why is that important for a property company? formulate together. KLG: For us, social sustainability means that we work with the cen- AS: The new management organisation plays an important role in tres of education to create campuses that are safe, secure, vibrant, the renewal of this approach, where a combination of external and accessible and inclusive. Our mission is to offer attractive and effi- internal recruitment has achieved a good balance between innova- cient knowledge environments. Consequently, social sustainability tion and experience. As a result, the new organisation represents a is a key component in our work processes for campus planning and new approach, while leveraging the expertise and history within the we listen to all stakeholders who are associated with the campus company. environments – students, graduate students, teachers, the surrounding communities, and others. This past autumn we conducted a new What challenges has the new organisation embraced? round of dialogues with Akademiska Hus’ most important stake- KLG: We are intensively working on an array of exciting issues, holders and this time we focused in particular on the issues and including the accelerating digital trend that is creating opportunities priorities that are important for the students. for us and for the entire property industry. As a result of digitisation, AS: In 2017 Akademiska Hus took a comprehensive approach to the universities and colleges place greater demands on us to provide sustainability issues and adopted a strategy in which they are fully new, more efficient facilities adapted to learning and research in this integrated into the company’s business objectives. We carefully new era. Our job is to help our customers improve the efficiency of reviewed and extensively discussed the UN’s 17 sustainable develop- their premises while making them more attractive. To deal with this ment goals, after which we selected those that are relevant to our trend we work closely with the centres of education, in part by link- operations. They are also now integrated in our business strategy. ing various systems for heating, ventilation and reservations, as well We are also pleased to note that our owner, the Swedish Government, as by offering visualisation solutions that allow both virtual and has recognised our social sustainability initiative and held it up as a physical visits with “enhanced reality”. One interesting project is role model for other state-owned companies. A Working Lab at Chalmers in Gothenburg, where we are developing and experimenting with the latest solutions in innovation and con- The third area of focus is the customer experience. struction. About ten innovation projects are linked to the building, What are you doing to improve it? ranging from developing “active learning workrooms” and outdoor KLG: The most important change – our new organisation – has offices, to running the building on direct current and creating a digi- been carried out. We have already seen clear positive effects in 2017 tal twin of the building. This venture is providing us with a variety of in our internal working methods from the changes that have been

AKADEMISKA HUS | ANNUAL REPORT 2017 3

implemented and we expect them to have a clear impact on our performed through our existing project organisation and with desig- deliverables and customer experience next year. Specifically, by nated employees who work with student housing throughout Sweden. focusing on the customer experience we will be better equipped to The government expanded our remit in 2014. Based on this meet the expectations of our customers, large and small. This includes remit, we have taken the initiative, in collaboration with the centres everything from feedback regarding daily management issues to of education, to set the level of 11,000 housing units as a reasonable collaboration regarding campus development. Quite simply, we will ambition to achieve. For our customers, almost all of whom have too shift from being a provider of steel and concrete to being a service few homes to offer, this represents an extremely significant invest- provider. Once we achieve success in this regard, we will also have ment that has been received with open arms. However, it is important created more and better contacts between us and our customers. to remember that this aspect of our remit is relatively small. While we are not the entire solution to the housing shortage at the centres You clearly state that you intend to achieve of education, we are an important complement. the defined goals within three years. That sounds like a challenging timetable, doesn’t it? Like any large property company, you are dependent on access KLG: In three years, we will be the property owner that our custom- to continual funding on good terms. What kind of a reception ers choose because we are the best, not because they have to – that is have you received from the credit market and the credit rating our goal in a nutshell. Now we are prepared to achieve that goal, with agencies regarding the investment in student housing? a new organisation and the right mix of expertise. In our opinion the KLG: Building the new student housing units on the campuses trend is moving so quickly that we must achieve our objectives within increases the value of these areas as a whole, which has been an impor- three years. We also see increased competition in our segment, with tant positive factor in our discussions with the credit rating agencies many knowledgeable participants who want to enter our market – and funders. The same applies to the fact that we are building the new maintaining and increasing our relevance is crucial. residential properties on our own land. Our size, extensive experience AS: These issues are also crucial for the success of the universities and excellent reputation on the credit market have also generated con- and colleges. For example, they compete for the students who adopt crete offers of extremely long-term financing on competitive terms. the digital trend much faster than the centres of education and teachers do. If Sweden is to be able to position itself as a leading knowledge You must also be pleased about the strong performance nation, the centres of education must be at the forefront of the digital for Akademiska Hus once again in 2017. trend. If Swedish institutes of higher learning are to be able to assert AS: Yes, profit for the year was SEK 6.5 billion, which is an improve- themselves in the international competition, they must be able to ment over the previous year’s excellent performance. However, keep provide housing for undergraduate and graduate students. That is why in mind that increases in value account for a substantial portion of the Akademiska Hus’ initiative to create 11,000 new student housing result – this year the total value of our property holdings increased by units by 2021 is so important. The addition of new housing opportu- 10.2 per cent. The actual measure of how well the business performs, nities is particularly important for all of the centres of education in net operating income, is about the same as the previous year. Stockholm, which has a serious housing shortage. What improvements do you expect during the coming year? The goal for creating new student accommodation KLG: In 2018 the new organisation and the new talent that we is ambitious. What are you doing to achieve it? recruited will give results in the form of more efficient resource uti- KLG: We believe that 11,000 new housing units is a reasonable and lisation. It should be possible to compare Akademiska Hus with the realistic goal. Akademiska Hus will be responsible for building 6,500 most efficient companies in the property industry. We must be able of these units. The practical work of achieving the objective will be to handle that comparison for the sake of our credibility.

AKADEMISKA HUS | ANNUAL REPORT 2017 4

AKADEMISKA HUS | ANNUAL REPORT 2017 Royal College of Music, Stockholm VALUE CREATION 5

Profitability at A strong education and research sector is important for Sweden’s competitiveness. Akademiska Hus aims to strengthen Sweden as a nation of knowledge and to create sustainable values for our owner Akademiska Hus is based and other stakeholders. How we plan, set goals and develop our business are affected by global trends and the expectations placed on sustainable values on us by the outside world.

A number of external factors, internationally tisation and globalisation. Over the next Strategic focus and in Sweden, affect the conditions under few years three areas are of particular impor- which Akademiska Hus conducts business. tance for Akademiska Hus’ development; the areas that Education needs are changing and higher customer experience, digitisation and social education and research are increasingly sustainability. influence our influenced by external factors such as digi AREAS FOCUS performance page 6

Understanding the issues that are relevant engaging in realistic dialogue with our stake- High expecta- to both internal and external stakeholders holders regarding needs and expectations is crucial. With this approach we can priori- is both important and requested. Conditions tions from our tise our activities and act on issues that in both the property industry and the higher Akademiska Hus’ stakeholders consider to education sector are rapidly changing.

stakeholders be of primary importance. Consequently, STAKEHOLDERS page 8

By analysing the issues that are most our offering to our customers. As a major The materiality essential for our long-term value creation, participant in issues that are vital both we become aware of how we add value for across the industry and beyond, we accept analysis lays the our customers, our owner and our other stake- our responsibility and drive development foundation for holders. We work hard to develop and improve forward. our goals page 9 ANALYSIS MATERIALITY

Development capacity, efficiency and cus- long-term priorities can be translated into Long-term tomer value are key concepts that permeate action. If we are to successfully achieve our the Akademiska Hus’ strategy. goals we must work together, thereby lever strategy Our strategy can be broken down into aging our own expertise and that of our

governs our business and operational plans so that our customers. STRATEGY work page 11

Short-term and long-term goals ensure con- With our role and mission as our starting Guided by tinual growth. We measure our performance point, we link our objectives to the UN’s to adapt our operations in order to achieve global development goals to better meet management our long-term goals. We must adjust these stakeholder expectations and to strengthen by goals goals in response to a changing world. Sweden as a nation of knowledge.

page 12 FULFILMENT OF OBJECTIVES

AKADEMISKA HUS | ANNUAL REPORT 2017 VALUE CREATION 6 Focus areas

Customer experience, digital transformation and social sustainability

Three strategic focus areas will be particularly important over the next few years. The overarching purpose is to strengthen customer relationships on all levels and to be the preferred provider of premises and knowledge environments that we want to be. The goal is to contribute to attractive campus and knowledge environments that strengthen the Swedish centres of education so that they can continue to be well-positioned to attract undergraduate and graduate students from all over the world.

CUSTOMER EXPERIENCE DIGITISATION of customer dialogues and workshops. – BASED ON DAILY LIFE – AN ISSUE FOR THE FUTURE Along with the education sector, we are One of our fundamental objectives is that Students are the first group among our involved in a shift where we see the chang- our customers should be satisfied with our stakeholders to have adopted a more digital ing needs in everything from the digital deliverables. This in turn provides a good lifestyle. Consequently, needs and expecta- structure of the buildings to how education platform for collaboration regarding knowl- tions regarding buildings used in higher can be provided. edge and learning environments, campus education are rapidly changing. Although Akademiska Hus’ owner and Board of plans, the influence of digitisation on higher much has already been affected by a more Directors expect that we will ensure a long- education and other important issues for the digitised world, the digital transformation is term relevant offering for the centres of future. Consequently, this autumn we will probably still in its infancy. About half of education and that we will develop specific implement a systematic project to review today’s children aged two to three years old action plans and activities for our digital how we can improve our day-to-day deliver- use the internet daily. From early childhood, transformation. Our innovation strategy is ables and how we can build more trusting this generation sees everything digital as a one of the platforms we use to address these relationships with both our tenants and the natural starting point. What kind of campus challenges and Akademiska Hus has now end users of the buildings – the approxi- will they need? To develop campuses and allocated resources to a dedicated depart- mately 300,000 students, researchers and learning environments able to withstand ment, Innovation and Sustainable Develop- employees who are active on campus. All of the test of time, we must understand their ment, to lead and promote this project. our efforts are aimed at strengthening our future needs. Our size works to our advantage in this customer relationships and in-depth dia- The dialogue on digitisation with our project and we can break down our devel logue about our common challenges is the customers has been underway for a long opment and innovation needs into many path forward. To strengthen the customer time. We conducted a business strategy smaller projects – often in close collabora- experience, we will introduce a project in analysis in 2016 that culminated in a report tion with our customers. We base our work 2018 to ensure that all employees gain a about digital trends in higher education. on an overarching vision that is broken down better understanding of the structure of our The discussion about these trends contin- into milestone projects and innovation business and our customer relationships. ued and evolved in 2017 through a number challenges. Together we create the strategic

AKADEMISKA HUS | ANNUAL REPORT 2017 VALUE CREATION Focus areas 7

conditions necessary to develop both our ronments where everyone feels welcome. we have identified as most relevant for our business model and cost efficiency. We see Undergraduate and graduate students are business. a great need to test ambitious ideas and a heterogenous group and campuses must Impact on the value chain – where we solutions on a small scale, after which we therefore allow for a variety of lifestyles. proactively work to make fair and develop- can scale up the results to apply to our prop- An integrated approach is therefore crucial ment-driven demands within sustainability. erty holdings at large. A strategic analysis and a supporting principle when we system- The objective is that we will understand, in project began in the autumn of 2017 and is atically work on campus plans together with dialogue with our suppliers, the challenges continuing into the spring of 2018 to iden- the centres of education and other stake- of the industry and be able to act more tify the future position that Akademiska holders. Campuses need to offer meeting responsibly with respect to all sustainability Hus will occupy as a service-based and sus- places and our mission is to provide the best perspectives, but with a special focus on the tainable property company that is prepared conceivable conditions under which ideas, social perspective. to meet the demands of an increasingly people, cultures and academic disciplines Sustainable employees and sustainable digitised world. can meet. In our role as a builder and prop- corporate culture – where the objective is erty owner, we aim to strengthen and to achieve an inclusive workplace that SOCIALLY SUSTAINABLE CAMPUS develop our work with social sustainability allows for both differences and develop- – OUR RESPONSIBILITY in three areas: ment. Specifically, this may involve recruit- We want to develop our campuses based Campus development – where we ment processes that focus on people who on a broader social perspective. For Akade- clearly base our approach on the human are otherwise excluded from the main- miska Hus, social accountability entails perspective when designing campus plans stream or hiring less experienced individu- contributing to positive social develop- in order to create accessible environments als to work for the company. ments and creating value for our customers. while making the customer more attractive. The social perspective is fundamental for We are exploring the potential by evaluat- developing truly sustainable campuses. ing our investments based on their ability Through inclusion and participation, we to contribute to the global sustainable create attractive, vibrant knowledge envi- development goals in Agenda 2030 that

AKADEMISKA HUS | ANNUAL REPORT 2017 VALUE CREATION 8 Stakeholders

Open dialogue with stakeholders for better deliverables We develop knowledge environments together with our customers; undergraduate and graduate students use them. Therefore they participate in our dialogue with stakeholders. Sweden can thrive as a sustainable nation of knowledge in a climate based on trust and understanding.

Close collaboration with our stakeholders with our customers. The stakeholder dia- sustainable are also increasing over time, at is crucial to be able to develop sustainable logue with this group is held directly on the same time that we see growing demand campuses and knowledge environments. campus. We have chosen to meet with for green bonds, which also benefits the As a major player in the built environment undergraduate and graduate students in price scenario. The credit rating agencies industry, we have many stakeholder rela- their daily environment to gain a deeper have also begun to consider sustainability tionships with a variety of interests that understanding of the areas they value most when analysing companies. require a balanced approach when taking and what can be improved or developed. them into account. Customers, business BROAD DIALOGUE partners, employees, lenders, suppliers and SUSTAINABILITY IN In addition to the structured dialogues with the owner all expect different things from THE CREDIT MARKET our customers and our owner to continu- Akademiska Hus. An open and broad-based Akademiska Hus has a substantial invest- ously develop campus and learning environ- dialogue increases understanding of our ment portfolio and with that comes a great ments, we also discuss requirements and individual priorities and challenges, allow- responsibility. During the year we met with expectations with our suppliers. We learn ing us to develop a trusting relationship. banks and credit rating agencies for an in- the opinions of our employees by conduct- depth discussion of our respective positions ing surveys and performance reviews. END-USER PERSPECTIVE and priorities regarding sustainability. The Community and business representatives, This year we included undergraduate and conversations were development-focused as well as politicians, are invited to our graduate students in our dialogue with and will lead to greater consensus regarding development processes and we actively stakeholders for the first time. Although the non-financial aspects, thereby increas- contribute to industry-wide development our customers are primarily the centres of ing the transparency of the credit rating of projects. We consider the broad scope of education, we are developing the knowledge our Company. these stakeholder dialogues to be crucial environments for the undergraduate and The banks are currently signalling grow- in providing direction and reassurance graduate students. Consequently, their per- ing interest in funding green investments regarding the priorities that we choose. spective is extremely important for creating and the existing frameworks are becoming sustainable solutions when we develop cam- increasingly established. The requirement puses and learning environments together levels for what is considered to be green and

CAMPUSES TO PROMOTE BROADER RECRUITMENT “Diversity is crucial if we are to avoid stagnancy in the discussions underway in higher education”, says Viktoria Waldrin, a social anthropologist from White Arkitek- ter. In collaboration with representatives from Akademiska Hus, she has interviewed upper secondary school students about their expectations and perceptions about higher education. The report was discussed at a popular seminar at the 2017 Almedalen Week political event, where questions were raised regarding how campus design can promote broader recruitment. Engaging in an in-depth dialogue with undergraduate and graduate students is an important way to obtain a clearer picture of how knowledge environments can become sustainable.

AKADEMISKA HUS | ANNUAL REPORT 2017 VALUE CREATION Materiality analysis 9

Materiality Analysis – the basis of our overall responsibility We want to keep an eye on the big picture regarding our development, project and administrative efforts. Continual dialogue with our stakeholders provides us with a good basis to identify the issues that are important for us to prioritise if we are to succeed.

To identify the issues on which we need to Taken together they provide a picture of the of perspectives and approaches. Broad-based focus to reach our goals, we analyse insights crucial issues that are most essential for us support is crucial since the important areas from our stakeholder dialogues, along with to address. The materiality analysis is sup- influence the content of both the business other aspects, such as the owner’s mission, ported by a broad representation of various plan and operational planning. external factors and our own experiences. skills from the Company to capture a variety

Development of campuses and knowledge environments, as well as undergraduate and graduate student housing with a long-term and integrated focus. Openness and trans READ MORE ON PAGE 23 parency in our business relationships. READ MORE ON PAGE 31

Resource-efficient and sustain able construction project management and property management with a strong focus on Greater inclusion in safety and security. our actions and our READ MORE ON PAGES 15 & 24 deliverables through a proactive approach to diversity and equal opportunities that create value. READ MORE ON PAGES 8 & 23

Collaboration on innovations, where involvement and a high development capacity are key. READ MORE ON PAGES 23–24

Responsible and sustainable supplier management. READ MORE ON PAGE 25

The issues in the illustration emerged from the materiality analysis that Akademiska Hus conducted. The analysis was based on stakeholder dialogues, the owner’s mission, external factors and our own experiences. The issues serve as the basis of our assessment of the business and its impact on the economy, society and the environment, thereby better equipping us to address our overall responsibility when developing our knowledge environments.

AKADEMISKA HUS | ANNUAL REPORT 2017 VALUE CREATION 10 Stakeholders

Focus areas

We do not want to miss any important issues expect us to focus. In 2017 we met with solutions for energy and waste manage- or perspectives in our long-term efforts. We students on campus for the first time, which ment. Dialogues with our customers have therefore engage in a variety of ways to pro- provides us with better insight into their revealed the need for collaboration in secu- mote a positive and productive dialogue. daily lives and the issues that they consider rity and sustainability as important future The illustration below describes the var- to be important for us to focus on. Students focus areas. ious groups with which we regularly engage proposed focus areas such as communica- in dialogue and the areas within which they tion options on campus, as well as smart

• Resource conservation on campus • Provide attractive knowledge environments and • Smart solutions regarding energy, air, water and campuses that enable the customer to compete in lighting, as well as sustainable transportation national and international arenas options • Contribute to increased construction of student • Environments and facilities on campus, both accommodation indoors and out • Clarity of the Akademiska Hus business model • Social well-being through open and accessible and rent setting, organisation and governance campuses Customers • Contribute to the customer’s long-term sus- • Collaboration and dialogue Students and their tainability efforts by being proactive and employees improving resource efficiency • Collaboration regarding safety and security

• Long-term capital structure • An attractive employer • Professional risk exposure that offers good working management Lenders, conditions • Stable, long-term operations banks and Employees • A safe and healthy working with profitability and yield in ratings environment accordance with objectives and strategies agencies • Good opportunities for competence development • Clear financial communication • Understanding one’s own role in the operations of Akademiska Hus

• Clear and relevant procurement Owner Suppliers terms and conditions • Contribute to the Government’s • Clear and ambitious require- objective of reinforcing Sweden as ments for the environment, a nation of knowledge Local health and safety, quality and • Increased customer benefit through and business social responsibility collaboration with centres of education communities • Long-term relationships • Act as a forerunner in corporate social responsibility • High resource efficiency • Contribute to increased construction of student • Active participation in dialogue on how society and the accommodation region can be developed, e.g. in urban development projects • Possibility of including businesses on campus • Contribute to increased construction of student accommodation Stakeholders & dialogue venue

CUSTOMERS (AND THEIR EMPLOYEES) SUPPLIERS OWNER • Meetings with various executives • Meetings related to procurement of • Annual strategy seminar • Development of campus plans framework contracts, purchase orders • Meetings with a focus on corporate • Customer Satisfaction Survey and supplier meetings governance • Audits EMPLOYEES LENDERS, BANKS AND RATINGS AGENCIES • Performance reviews and goal-setting LOCAL & BUSINESS COMMUNITIES • Financial statements process • Regional and city-wide planning and • Meetings development meetings • Meetings to discuss establishment plans STUDENTS • Meetings with e.g. interest groups and • Interviews and meetings on campus industry organisations

AKADEMISKA HUS | ANNUAL REPORT 2017 VALUE CREATION Strategy 11

Strategy as our gateway to the goals Since 2013, Akademiska Hus has been following a long-term strategy that extends to 2025. The main focus of the strategy is the systematic development of customer value, with an eye to sustainability and open communication.

Through cooperation and dialogue with our customers, we create attractive campus environments that contribute to our common goal – to strengthen Sweden as a nation Develop Deliverables the offer of knowledge. A number of trends have been Measure and improve our daily work strengthened since the strategic platform Measure was designed and Akademiska Hus faces performance even stronger expectations – from both customers and its owner, as well as from society Devel at large. The need for more student accom- opment Dialogue Improve modation, the accelerated pace of digitisa- Product & service customer development, as tion, greater focus on social sustainability relations to well as experi understand and stronger competition for undergradu- mentation in what our collaboration ate and graduate students are just a few customers with customers examples where an attractive campus can Better customervalue contribute to the success of the centres of understanding education. This means that both now and Insight moving forward we will take an even clearer Cooperate with customers Reinforced to acquire insight into expertise overall responsibility for development of knowledge environments tomorrow’s sustainable campuses along and to develop our employees with our customers. The strategic focus areas for the next three years are customer experience, digitisation and social sustaina- The primary focus of our strategy is cooperation with our customers. Through dialogue with customers bility (read more on pages 6–7). we promote insight and consensus on important issues such as sustainability and campus development. Consequently, even in the future we will be able to provide modern knowledge environments that help to make the centres of education attractive. Our strategic model comprises a ‘development wheel’ that NEW ORGANISATIONAL STRUCTURE drives us forward towards our vision and serves as the foundation of our business plan. CONTRIBUTES TO DEVELOPMENT We have dedicated our efforts over the past few years to creating an efficient organisa- development unit that is divided into three FOCUS ON DEVELOPMENT CAPACITY tion in which the employees have a solid geographic units, as well as a central staff An important aspect of meeting the chal- understanding of the needs of the centres for support functions. We continue to have lenges of the future entails successfully of education and the challenges that the a local presence through our existing prop- conducting innovation initiatives and being Company faces. Meanwhile we have focused erties. The purpose of the reorganisation is well-prepared for the digital transformation heavily on communication and dialogue to to create conditions under which we can of our business and industry. In response to improve customer relations and to clarify realise our strategic objectives, increase our a variety of external factors such as Agenda our role and our deliverables. Implementa- development capacity and become more 2030 and the global sustainability objec- tion of the new organisational structure in efficient in both projects and management. tives, changes in the state’s ownership 2017 was yet another step in our effort to The new structure focuses on the manage- policy and the owner’s expectations of our become better equipped to manage future ment business, while the existing potential contribution to more student housing, a challenges. As of the beginning of 2017 we and expertise within the company can be bet- need has arisen for a clearer governance no longer have regional divisions; instead ter utilised. We can therefore deliver greater model that will be implemented in 2018. we have three core processes. We have value in both our everyday deliverables and organised the Company into a management our development projects to both our cus- unit, a project unit, and campus and business tomers and our owner moving forward.

AKADEMISKA HUS | ANNUAL REPORT 2017 VALUE CREATION 12 Objectives and objective achievement

Management by objectives towards our vision

With a long-term perspective, we actively and Progress has been made in several areas in In 2017 we developed a new, clearer and sustainably develop and manage our prop- 2017. One example is our work to achieve an comprehensive management tool, a balanced erties and the surrounding environment. accident-free workplace. The industry organ- scorecard. The goal is to increase transpar- We set objectives that move us towards our isation that Akademiska Hus helped to create, ency both internally and externally regard- vision – leading knowledge environments. “Håll Nollan”, has emerged during the year. ing our strategic objectives and future

Goals 2017

DESCRIPTION FULFILMENT OF OBJECTIVES 2017

OWNER OBJECTIVES

RETURN ON OPERATING CAPITAL The return on operating capital in 2017 was 5.9 per cent. The increase in equity, which makes it Should be at least 6.5 per cent1 more difficult to achieve the owner’s objective, can be explained by the substantial positive unrealised changes in value in the property portfolio in recent years. In addition, the net liability portfolio increased. Please see the sensitivity analysis on pages 62 and 73.

DIVIDEND The proposed dividend will amount to SEK 1,630 million, corresponding to 60 per cent of profit Should be between 40–60 per cent for the year available for the payment of a dividend. For more information about the allocation of profit after tax2 of profit, see page 55.

EQUITY RATIO The equity ratio was 43.3 per cent. The increase in the equity ratio can be explained by the Should be between 30–40 per cent substantial positive unrealised changes in value in the property portfolio in recent years. Please see the sensitivity analysis on page 62.

SUSTAINABILITY GOALS

ENERGY The amount of purchased energy fell during the year by 1.6 (4.0) per cent, which exceeds the goal. Energy purchased each year, kWh/ Since the starting point in 2000, the decline has been just over 35 (34) per cent, which means that m2, will decrease at such a rate the long-term reduction goal is being followed. Major investments in energy efficiency measures that there will be a 50-per cent have been carried out all over Sweden, but have not yet had full impact. A Company-wide energy reduction by 2025 compared audit is underway and is essentially expected to be completed in 2018. with 2000.

2 ELIMINATE CO2-FOOTPRINT Greenhouse gas emissions levels from properties during the year were 7.0 kg CO2/m (7.7). The FROM OPERATIONS total reduction of indirect greenhouse gas emissions was just over 2.3 (11.4) per cent. The amount Relates to CO2-footprint for of solar electricity has increased by 5 (60) per cent from 2016. Extensive investments in energy heating, cooling and electricity efficiency were made during the year that will reduce the carbon footprint. Continued discussions with energy suppliers on their roadmap towards fossil free delivery will result in new agreements for products with reduced environmental impact, known as additional products.

ACCIDENT-FREE WORKPLACE Activities have been carried out in accordance with the action plan, primarily focused on the The objective applies both to management organisation. Training and aids in the form of system support and information our own employees and to those materials have been developed and implemented to strengthen our employees’ knowledge and whom we hire for our projects. awareness of the safe workplace. The “Håll Nollan” industry organisation was formed in 2017 at the initiative of Akademiska Hus and others. These parties within the construction industry are cooperating to jointly create safer workplaces.

CSI This year’s CSI continues to show low customer satisfaction at 60 (61). This is not acceptable. Increase Customer Satisfaction The measurement indicates that our strength is in our people, but that customers experience the Index (CSI) Company's management and ability to collaborate as areas for development. In 2018 great emphasis will be placed on the customer relationship with several strategic and operational activities to strengthen the customer experience.

1) Earnings before changes in value and tax, excluding net interest income/expense in relation to average operating capital, i.e. equity and net loan liability. 2) After reversal of changes in value and associated deferred tax.

AKADEMISKA HUS | ANNUAL REPORT 2017 VALUE CREATION Objectives and objective achievement 13

priorities, which we do through our compre- sustainable development goals as defined tainability is an integral component. This hensive goals and well-defined factors for by the UN that Akademiska Hus considers is in line with our aspirations about how we success for each one of the four perspectives: to be the highest priority in our business. want to manage the business. The scorecard Customer, Employee, Finances and Develop- By doing so we obtain a broad holistic view will be implemented during the first quarter ment. We link the goal areas to the global of our overall management, in which sus- of 2018.

Scorecard 2018

GOALS SUCCESS FACTORS DESCRIPTION

CUSTOMER

“We provide • We treat our customers with respect and One of our fundamental objectives is that our better delivera- engage in good business practices. customers should be satisfied with our deliv erables. Consequently we regularly measure bles than others • Through accurate, easily accessible and our total customer satisfaction through a and we are our relevant information we simplify daily life for our customers. Customer Satisfaction Index. customers’ first We also measure how our customers perceive • We accept overall responsibility and create choice” our interpersonal skills and reliability. The value for our customers through efficient and results provide guidance for the areas that attractive buildings and campuses. we should prioritise.

EMPLOYEES

“We have • We have leaders who create conditions Employees are crucial to our success. Conse- dedicated in which their employees are able to do quently we use the Akademiska Hus Perfor- a good job. mance Index to measure how the employees employees who perceive that we meet the objectives of the achieve high • We have responsible employees with the right skills. success factors leaders, skills and health. standards” Our objective is an accident-free workplace. • We have healthy employees and an As a result, we measure the accident rate and accident-free workplace. apply industry-wide working methods within the framework of the “Håll Nollan” initiative to promote a strong safety culture.

FINANCING

“Our work helps • We work actively and responsibly with the Energy reduction continues to be a focus area. to increase the agreement portfolio. Our energy strategy enables us to reduce the need for energy supplied to our properties. We carry value of our prop- • We are cost-conscious and have good control of our costs. out an annual climate balance sheet with the erty portfolio” aim of reducing our carbon footprint, regarding • We take responsibility for ensuring that areas such as operations, projects and travel. our investments are climate-smart and The owner’s objective includes financial future-safe. objectives regarding the Company’s return on operating capital, equity ratio and dividend.

DEVELOPMENT

“Our development • We collaborate with others in the field We need to maintain a high pace of innovation capacity helps of sustainable development in the to meet future challenges, which will require community and innovation. an infusion of internal innovation funds. to increase cus- We see a continued need for more student tomer value” • We leverage the potential of digitisation to create added value. accommodation. Consequently our objective is to help add 11,000 student housing units • Our working methods and processes are by 2021 and we will be directly responsible for efficientand maintain high standards building 6,500 of these units. throughout.

AKADEMISKA HUS | ANNUAL REPORT 2017 VALUE CREATION 14 Employees

Focus on health, skills and leadership Working in collaboration with our customers, we develop, build and manage knowledge environments that help make Swedish centres of education viable contenders among the international competitors. We must have engaged, motivated and healthy employees if we are to achieve our goals.

and resulted in updated guidelines and MOST IMPORTANT RIGHT NOW working methods in these areas. The employees are crucial for the success of Akademiska Hus. At the end of the year work began on a new tool SUPPLY OF SKILLS CONTINUES TO BE to streamline the process of breaking A CRITICAL ISSUE FOR THE FUTURE case down our strategy into business and Hiring is a challenge for the property sector Lots going on operational plans. Now we will be able and there is strong competition for the – see examples to see even more clearly how each from 2017. employee can help Akademiska Hus attractive candidates currently on the mar- achieve its mission through their ket. Within projects and management there daily work. is a great need for experienced project managers, as well as operating engineers and technicians with high technical expertise. struction. In order to do a good job, our In 2017, the Company prioritised the follow- To ensure that the appropriate skills are employees must constantly acquire new ing areas, which in various ways promote available, Akademiska Hus participates in skills and have opportunities for growth. strengthening employees who want to and both its own and industry-wide initiatives. Akademiska Hus has therefore initiated an can do more. For example, we offer internships, mentor- internal academy, with the vision of being ship, summer jobs and opportunities to a role model in the industry in terms of GOOD LEADERSHIP write theses. We also collaborate with sec- skills development. The training programs Good managers and leaders represent one ondary schools, upper secondary schools will be role-based and tailored to our opera- of the most important success factors for and vocational colleges with a focus on tions, including both teacher-led courses Akademiska Hus to achieve the objectives property management, as well as with and e-learning. Our own employees will that we have set. A new manager and leader- colleges and universities. Akademiska Hus be responsible for holding many of the ship philosophy was formulated and a vari- believes in being an inclusive company training programmes. ety of training programmes have been and is engaged in initiatives to increase the available to our managers and leaders since diversity of the property industry regarding HEALTH INITIATIVE early 2017. A first mandatory course has gender, age and ethnicity. FOR SUSTAINABLE EMPLOYEES been held in communicative leadership, During the year, a number of new services which is of great importance for the com- INTERNAL DEVELOPMENT have been developed to promote good prehensive changes that Akademiska Hus Creating knowledge environments of the health. Centralised occupational health has undergone in connection with its reor- future requires cutting edge expertise and services ensure that we receive high-quality ganisation. At the annual meetings for man- the ability to work in close collaboration care that allows for targeted interventions agers, ethics and diversity, as well as health with our customers to effectively take devel- to support and help all employees. Our and the work environment, were discussed opment concepts from design to final con- health insurance provides us with access to preventive e-health services around the clock in areas such as stress management. Guidance is also available from a psycholo- ATTENDANCE NUMBER OF gist, lawyer, business advisor or health NEW EMPLOYEES IN 2017: coach. In addition, OneLab’s smart health analyses, which produce a baseline person- alised health report have been offered to 96.3% our employees since early 2017. During the Absenteeism due to illness in 2017 76 year Akademiska Hus’ wellness network was 3.7 per cent, compared with 3.3 To be compared with 47 people offered engaged employees to participate the previous year. who were employed in 2016. in a fitness “challenge”.

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The “Håll Nollan” industry organisation provides us with a forum where we can work with other parties to formulate ideas on how to reduce the risk of accidents in our workplaces. Initiatives include industry standards, sharing experiences and training programmes.

Håll Nollan – important collaboration for safer construction sites.

The Håll Nollan industry organisation ways in the different phases of construc was officially launched at the Årets tion projects, including both contractors Bygge 2017 gala. As one of the initiators, and property developers. Work groups Marcus Törnkrantz Akademiska Hus is greatly encouraged comprised of representatives from Work Environment Engineer, that there is now a clear association for members of the association will address Akademiska Hus parties in the construction industry four areas of interest that have been “As one of the initiators, Akade where we can work together to create identified. We are pleased to note that miska Hus is obviously committed safer construction sites. more companies have already joined, to providing continued support and of course we hope that many more and participation in the project. Håll Nollan is a challenge and a reminder will follow their good example. Moving forward, a large part of of one of the most crucial issues for our efforts to develop procedures those who work in the construction and for safer construction sites will property industry in Sweden – no one find a natural home under the should be injured on our construction Håll Nollan framework. Working sites. The construction industry does not together with others offers sev only refer to construction companies, eral advantages. We hope that Håll Nollan will become a forum but to all companies and organisations that order, plan and execute construc 3,587 where we can help each other, CONSTRUCTION ACCIDENTS WITH find inspiration, and ultimately tion projects. SICK LEAVE REPORTED IN 2017 improve conditions in the indus Håll Nollan was founded by a total of try so that fewer people will be Source: Swedish Work Environment Authority 13 parties who are involved in various injured or killed on construction sites around Sweden.”

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Construction start for KI Residence – housing for 400 undergraduate and graduate students at Karolinska Institutet

In November ground was broken for a project in which Akadem of education to remain attractive in the future. More student iska Hus has invested about SEK 430 million to build 322 flats accommodation will also contribute to a more vibrant campus with room for over 400 undergraduate and graduate students on with round-the-clock activity, an objective that both Akademiska the Solna Campus, Karolinska Institutet (KI). The buildings, which Hus and KI promote. KI is one of the world's leading medical are located on campus in direct proximity to the growing Haga schools and currently rents about 400 homes scattered around staden neighbourhood, will be ready for occupancy in 2019/2020. the greater Stockholm region. For KI, more and better housing is therefore a key factor for remaining an internationally The Stockholm area has a huge student housing shortage and attractive centre of education. availability of accommodation is critical for the city’s centres

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OWN MANAGEMENT Example – KTH Campus On 8 September 2016 ground was broken for 430 new student housing units at Teknikringen on the KTH Our campus plans always include the issue of student Campus. These student housing units are the first that accommodation. Since we received our expanded remit from Akademiska Hus is building under its own management. the Swedish state in 2014, we may also directly build student housing under our own management. This provides us with a broader palette for finding solutions in collaboration with others. The KTH Campus is an example where we are creating new student housing through a variety of pathways.

TRANSFERRED LAND TRANSFERRED LAND TRANSFERRED LAND We have made it possible We are transferring land Former KTH student and for ByggVesta to create two that will enable Einar founder of Elite Hotels of student apartment buildings Mattsson AB to build Sweden, Bicky Chakraborty, of more than 100 apart three new student is investing and having ments with new common apartment buildings 58 apartments built for outdoor spaces. with 270 apartments. students.

Creating customer value with more student housing

The housing shortage should not pose an obstacle to MAPPING OUR CAMPUSES education and research since, by extension, this could In the spring of 2017 Akademiska Hus conducted a review prevent the development of Sweden as a nation of knowl- of our entire property portfolio along with the customer and edge. Consequently, the issue of student housing is always identified tracts of land on our campuses where student hous included when Akademiska Hus participates in formulating ing could be built. These geographic locations were analysed campus plans, whether the proposal entails building hous- to avoid competing for sites where the centres of education ing on land that Akademiska Hus owns, or on land belong- want to build for their own purposes in the near future. ing to some other property owner.

ONLY PATH FORWARD – MORE UNDERGRADUATE CAMPUS VALUE THAT STRENGTHENS COMPETITIVENESS AND GRADUATE STUDENT HOUSING Competition for international undergraduate and graduate Despite the recent surge in construction of student housing students is intense. Becoming increasingly attractive to inter in Sweden, many more flats are needed. Our forecast shows national undergraduate and graduate students is therefore that by 2021 we can contribute to the construction of 11,000 crucial for the development of Sweden as a nation of knowl undergraduate and graduate student housing units, including edge. Adequate undergraduate and graduate student housing 6,500 that could be built under our own management. Between is an important component in the overall picture for a campus 2013 and 2017 we built or began construction on 3,500 of to meet international standards as a learning environment. these units. Between 2021 and 2026, Akademiska Hus could Consequently, our investments in undergraduate and graduate be involved in the construction of an additional 10,000 units student housing create value for our customers. built close to campuses. It has not yet been determined how many will be built under our own management.

AKADEMISKAAKADEMISKA HUSHUS || ANNUALANNUAL REPORT 2017 MAINSECTION 18 SubSection

A building that unifies within the built environment

In the past, architecture students have gone in one direction, The goal of the renovation project has been to contribute to and engineering students in another. They are now housed more creative and stimulating learning environments. The new under one roof in the Built Environment building at Chalmers premises will encourage meetings between undergraduate and in Gothenburg. A grand opening celebration was held in graduate students from the different departments along the September following a major renovation project. walkways and at meeting places created on the entire block.

Ground broken for A Working Lab in Gothenburg

In June ground was broken for A Working Lab. We will work here with our partners to find innovative methods and solutions, including for the three innovation challenges issued by Akademiska Hus for the project: “flexible and digital learning environments and workplaces”, “value-adding meeting places” and “a climate- friendly and resource-efficient building with a low CO2 footprint”. Several innovation projects are already up and running, and together with our innovation partners even more will begin, both during con struction and afterwards. Akademiska Hus is investing a total of about SEK 380 million in the project. Occupancy is expected in the summer of 2019. The goal is for the new construction to achieve the sustainability requirements for the Swedish ‘Miljöbyggnad’ Gold certification level.

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A long-term sustainable approach will be used to develop the Solna Campus at Karolinska Institutet. Consequently, the campus plan was designed in accordance with the United Nations’ global sustainable development goals and the environmental objectives that Sweden has undertaken to achieve by 2030.

Campus plan for KI – Life science knowledge hub with a green heart

The campus plan for the period through 2030 is called “Life science knowl edge hub with a green heart”. Projects have begun during the year to achieve a more cohesive campus. To prioritise pedestrian and bike traffic, dedicated socially and ecologically value-creating green environments are being set Ole Petter Ottersen, aside. One initiative includes a wellness trail for walkers. Vice-Chancellor, Karolinska Institutet The plan will help Karolinska Institutet to achieve its vision of improving “As KI grows and research evolves, we need human health and creating a centre for the world’s leading life science to invest in new environments and modern infrastructure that creates opportunities arena in Stockholm and Hagastaden. The plan serves as a framework for for beneficial and interdisciplinary research Akademiska Hus’ development of the physical environment within the KI and education. Students, teachers and Solna Campus and for integration of the campus into the ongoing urban researchers must have the best possible development initiative. working conditions, so that KI can remain The fundamental idea of the campus plan is also to create more room for globally competitive to retain and recruit employees in the future. Further develop the business sector and to tie it closer to academia. In this way the plan ment of the campus will enable KI to deliver will provide a stronger innovation environment on and around campus. even higher quality and become even more The physical environment will be enhanced with expanded walkways and visible in the international arena.” a wide range of attractive meeting places.

AKADEMISKAAKADEMISKA HUSHUS || ANNUALANNUAL REPORT 2017 MAINSECTION 20 SubSection

Margaretha Fahlgren, Professor at Uppsala University and chair of the steering Theatre in Uppsala committee for the Humanities Theatre project. provides a venue for humanist dialogue

“The Humanities Theatre is a In close collaboration with Uppsala The building will also serve as a commu meeting place within the University, Akademiska Hus has built a nication pathway linking existing build university between disciplines new arena dedicated to the humanist ings in the English Park campus. With its and faculties, with a focus on the humanist dialogue. The conversation, the Humanities Theatre. theatre, offices, classrooms and meeting facilities, the building will serve as an Humanities Theatre also opens The goal was to create a unique space addition to several departments. The the university to the community for unlimited dialogue where the human and encourages discussions, Humanities Theatre will also be available ities are showcased. Here, the focus will development and the search for independent activities where various be on human beings as thinking and for knowledge.” events, lectures and meetings can be creative individuals. The Humanities held in the evenings. Theatre will invite dialogue within the university between subjects and facul ties, as well as between the university and society – locally, nationally and internationally.

AKADEMISKA HUS HUS | ANNUAL| ANNUAL REPORT REPORT 2017 2017 DESCRIPTION OF BUSINESS 21

We develop, build and manage for a wiser Sweden We take a long-term strategic approach to continually create attractive and sustainable knowledge environments with our customers. We take full responsibility for the development of campuses at colleges and universities, where student accommodation plays an important role.

Akademiska Hus owns and manages several of Sweden’s most sophis- collective expertise across the country. A collective management organ- ticated knowledge environments for education, research and innova- isation is complemented by a project organisation and three geographic tion. Our work is based on our core processes so that we can apply our units that are responsible for campus and business development.

Campus and business development

Campuses that are vibrant during all the hours of the day and interact with the surrounding community are crucial for Sweden’s higher education institutions to be competitive. Consequently we formulate campus plans to develop entire campuses in close cooperation with our customers. With our collective knowledge we create campuses that provide, in addition to education and research, other services such as cafés, sport facilities, restaurants and supermarkets. Our campus plans always include the issue of student accommodation. The Campus and Business Development units have a special focus on public and customer relations.

Read more on pages 29–31

AKADEMISKA HUS | ANNUAL REPORT 2017 MAINSECTION 22 SubSection

AKADEMISKA HUS | ANNUAL REPORT 2017 Umeå Campus, Umeå University, Umeå DESCRIPTION OF BUSINESS Campus and business development 23

Campus and business development Sweden’s learning environments and campuses are undergoing constant development. Needs, desires and visions are discussed at all centres of education. Factors such as digitisation and globalisation affect teaching and research, and place new demands on both existing and future knowledge environments.

Working with a centre of education to inter- the community. Knowledge and learning MOST IMPORTANT RIGHT NOW pret and convert these visions so that the environments of the future, along with cam- The new organisational structure will physical environment can best support the pus and urban development, are two areas enable us to develop an even closer relationship with our customers so that strategies is at the heart of campus develop- in which we have prioritised innovation. together we can understand our chal- ment. Exploring how to achieve long-term lenges and opportunities. As a result, sustainable development of the physical PREMISES FOR EFFECTIVE LEARNING we will be better equipped to contribute to their success through campus devel- environment, in close consultation with the The premises and rooms of a centre of edu- opment. administration of the centre of education and cation need to be adaptable and functional to its end users, results in the most successfully optimise use in both the short term and the detailed development projects. We follow a long term. The flexibility of the premises to Campus development is a key issue for us at structured approach with a focus on the long- allow different learning methods is impor- Akademiska Hus. In collaboration with Swe- term and sustainability. Leveraging the joint tant. One example of facilities that directly den’s centres of education we take full respon- knowledge we share with our customers and support education is the Active Learning sibility and contribute with our expertise and converting it into clearly defined development Classroom (ALC), which promotes effective know-how in the development of long-term plans and campus plans is the key to success. teaching in interactive classrooms using sustainable knowledge environments. The digital tools. We have created several ALCs student housing shortage, which is found in STRONG INNOVATIVE ABILITY in Sweden together with our customers, several parts of Sweden, also affects how Swe- To meet the challenges we face as a commu- including interactive learning environ- den’s centres of education want to develop nity builder we must enhance our power of ments that we have been building in collab- their physical environments and campuses. innovation to ensure our delivery and con- oration with Umeå University since 2014, tribute value to customers. We will develop with completion expected in 2018. Akadem- CAMPUS PLANS AS TOOLS products, services and practices through iska Hus is funding two research projects in The campus is a venue for research and structured innovation partnerships, thereby order to evaluate them and learn from the learning, as well as for encounters with the contributing to sustainable development in new learning environments. business community and the interface for encounters with the community at large. In addition to developing efficient and inspiring learning environments, we meet user needs by creating meeting places, building student Land use, architecture and urban housing and collaborating with other stake- design holders to ensure an attractive range of services. Restaurants, opportunities for cultural To ensure that the campus Ecology and Resources and sports activities and access to child care offers a sustainable environ- environment and energy and preschools in close proximity to campus ment, Akademiska Hus has developed a sustainability are examples of services that make life easier model that addresses a Participation and increasingly integrated into and around series of issues related to and process the campus. vibrant and attractive campuses. More undergraduate and graduate stu- Innovation Transport dent housing is high on the priority list at and business and travel many centres of education. Campus-based student housing is one of the most important factors for creating a vibrant environ- Social ment that is open, safe and inviting round welfare the clock, every day of the week.

AKADEMISKA HUS | ANNUAL REPORT 2017 DESCRIPTION OF BUSINESS 24 Projects

Projects

Akademiska Hus’ project portfolio consists of approved and planned projects for about SEK 17 billion. Through these projects, we help to ensure that higher education institutions meet their long-term needs for premises appropriate for education and research.

knowledge together. Through our projects we create buildings for teachers, undergraduate and graduate students. We must constantly remain updated in order to find out, and better understand, what our customers need. By strengthening our expertise we become a better sounding board for our customers and a more challenging and skilled contractor.

LEARNING ORGANISATION We want to create even better conditions for becoming a learning organisation. Knowledge sharing is currently a key concept in the industry. We work to find new structures for this purpose within the project unit through mentoring, seminars and development groups.

One of the largest projects that was completed in 2017 was the Segerstedt Building in Uppsala. The new Overall, we believe that these three focus building now houses 600 Uppsala University employees under one roof. In addition, the building serves as areas will strengthen our ability to work a meeting place for students, with study areas and meeting rooms. with our customers to create sustainable and efficient buildings. strengthen our role as contractor and our MOST IMPORTANT RIGHT NOW task of optimally meeting the challenges DIGITISATION AND INNOVATION We will continue to work in our three that we and our customers face through our During 2017, the digitisation discussion in focus areas that were identified in 2017. We aim to improve our construction pro- projects. The three areas are: the construc- the property industry gained further cess, strengthen our expertise and focus tion process, strengthened expertise and momentum and we see an increasingly clear more on being a learning organisation. learning organisation. interest from our customers and suppliers in the opportunities that will accompany CONSTRUCTION PROCESS digitisation. We are shifting to a more digital Akademiska Hus is both builder and man- We will run a cost-effective, competitive, approach to running our construction pro- ager, where long-term management is part sustainable and collaborative construction jects. Albano in Stockholm is one example of of our remit. Developing projects for long- process with clearly defined interfaces and a project that is testing new models moving term management provides us with excel- transfer points. By setting clear project towards a more digital approach. lent opportunities to invest in sustainable requirements throughout the construction One digital and innovation focused pro- and innovative solutions. Investing activi- process, from early phases to transfer ject that began during the year is A Working ties are pursued according to a systematic phases, we can deliver a product of the right Lab on the Johanneberg campus at Chalmers evaluation process from project concept to quality according to a common vision. in Gothenburg (read more on page 18). It is approved investment. Investments exceed- an innovation arena that is also serving as a ing SEK 50 million, which include about STRENGTHENED EXPERTISE test bed during the construction process. As 95 per cent of our investments, are decided By focusing on the world of academia, we one of Sweden’s largest property companies, by the Board of Directors. have accumulated experience that is of great we have a large project portfolio. All of these During the year, the project organisa- benefit to our customers all over the coun- investments aim to strengthen the business tion identified three focus areas to further try when we build Sweden as a nation of of our customers.

AKADEMISKA HUS | ANNUAL REPORT 2017 DESCRIPTION OF BUSINESS Projects 25

SUSTAINABILITY IS A GIVEN Both Akademiska Hus and many of our customers have high aspirations in sustainability. Our role as a long-term property owner provides an excellent opportunity for building wisely and sustainably. Our goal is always to deliver the highest possible customer value through resource efficiency and good cost management. At the same time, Akade- miska Hus constantly strives to minimise environmental impact through sustainable construction processes and carefully considered material choices. All new construction and major renovation projects must qualify, at a minimum, for a silver rating in the Miljöbyggnad environmen- The library at Karlstad University was designated Green Building of the Year (Årets Miljöbyggnad) at tal certification system. Building to Miljö the 2017 Sweden Green Building Awards ceremony. The 15-year-old building is the oldest building ever byggnad standards provides confirmation of to be upgraded to meet the standards for Miljöbyggnad certification at the Gold level. The certification is a result of long-term, targeted collaboration between the University Library, Karlstad University and important qualities in a building in terms of Akademiska Hus. energy, indoor environment and material choices. To achieve this, we stay up to date on (Årets Miljöbyggnad) award with the expla- in 2017 replace earlier contracts on the cat- the latest methods and technologies. We cur- nation: “To be able to certify a building at the egory level, with a clarification of the process rently have 37 certified buildings, including very highest Green Building level 15 years regarding requirements. This means that four at the gold level and 33 at the silver level. after construction, without any refurbish- about 90 per cent of the aggregate purchas- The certified new construction and reno- ment or renovations, is proof of great fore- ing volume (based on suppliers with more vation projects must subsequently undergo a sight, commitment and motivation regard- than SEK 100,000 in annual purchasing vol- validation process, and to date twelve building energy and environmental issues, and a ume) is screened. The Code of Conduct is ings have been verified with retained certifi- building above and beyond the ordinary.” based on the ten fundamental principles of cates. During the year two of the buildings the UN Global Compact, and we hope to certified at the Gold level garnered attention SOCIAL RESPONSIBILITY jointly develop sustainable supplier processes when the ABE school on the KTH campus in AND CODE OF CONDUCT and value chains together with our suppliers. Stockholm submitted the environmental A crucial contribution to a more sustainable Akademiska Hus is a member of the new certification system’s 1,000th application, society goes through the requirement speci- “Håll Nollan” industry initiative. This initi- and the University Library in Karlstad fications of our suppliers. Our largest pur- ative is a challenge and a reminder of one of received the Green Building of the Year chase volumes are in construction, architec- the most crucial issues for the construction tural and construction engineering services, and property industry in Sweden: no one as well as in the energy sector. Akademiska should be injured on construction sites. Hus purchases services and goods for Read more about this on page 15. approximately SEK 4 billion per year from almost 3,000 suppliers. 37 The Procurement Policy of Akademiska NUMBER OF CERTIFIED Hus describes the fundamental values that BUILDINGS, INCLUDING underlie purchasing and procurement. We require suppliers to meet “shall” criteria, including environmental, quality and safety standards, and have a Code of Conduct for 4 suppliers. Compliance with these qualifica- AT THE GOLD LEVEL tion requirements is mandatory in all procurement procedures. Contracts prepared WE SUPPORT

AKADEMISKA HUS | ANNUAL REPORT 2017 DESCRIPTION OF BUSINESS 26 Projects

Our largest projects

COMPLETED PROJECTS, 31 DEC. 2017 > SEK 100 MILLION Type of Investment Additional Project name Location premises limits, SEK m floor space, m² Completed Customer

Biomedicum – Comparative Medicine Stockholm Laboratory 774 11,000 2017-Q4 Karolinska Institutet

Segerstedt Building Uppsala Offices 715 17,400 2017-Q2 Uppsala University

Built Environment Gothenburg Education 324 20,600 2017-Q4 Chalmersfastigheter

ABE School Stockholm Education 185 4,500 2017-Q4 Royal Institute of Technology

Education Building Stockholm Education 130 2,800 2017-Q4 Royal Institute of Technology

Humanities Theatre Uppsala Education 129 2,300 2017-Q2 Uppsala University

EES School Stockholm Education 125 — 2017-Q4 Royal Institute of Technology D Building phase 1 and 3 Linköping Offices 112 900 2017-Q1 Linköping University Total 2,500 59,500

APPROVED PROJECTS, 31 DEC. 2017 > SEK 100 MILLION Additional Type of Investment Percentage floor space, Expected Project name Location premises limits, SEK m accrued, % m² completion Customer Albano Stockholm Education 3,302 11 100,000 2021-Q4 Stockholm University Biomedicum Stockholm Laboratory 2,822 66 48,000 2018-Q2 Karolinska Institutet Ångström Phase 4 Uppsala Laboratory 1,185 4 30,000 2021-Q3 Uppsala University Humanisten Gothenburg Education 668 36 12,100 2019-Q4 University of Gothenburg and offices KI Residence Stockholm Residential 434 2 15,500 2019-Q3 Karolinska Institutet Valla Student Building Linköping Education 411 24 13,500 2019-Q3 Linköping University Student accommodation Teknikringen Stockholm Residential 400 41 8,900 2019-Q1 Akademiska Hus1 A Working Lab Gothenburg Other 381 21 9,600 2019-Q3 Akademiska Hus and others Lab of the Future Stockholm Laboratory 322 53 — 2018-Q4 Karolinska Institutet Medical Biology Centre Umeå Laboratory 306 41 1,800 2020-Q1 Umeå University Police programme, Södertörn Stockholm Education 260 99 5,400 2018-Q1 Södertörn University A house Stockholm Other 241 31 900 2018-Q4 Akademiska Hus and others Police training programme, Umeå Education 165 91 5,000 2018-Q1 Umeå University Umeå University GIH swimming centre Stockholm Other 118 14 — 2019-Q3 City of Stockholm Child and youth studies Stockholm Education 111 8 — 2019-Q2 Stockholm University Frescati backe Projects < SEK 100 million 1,874 — Total 13,000 250,700

PLANNED PROJECTS, 31 DEC. 2017 > SEK 100 MILLION Type of Investment Additional Expected Project name Location premises limits, SEK m floor space, m² completion Customer Naturvetenskap life Gothenburg Laboratory 958 26,500 2022-Q2 University of Gothenburg Forum Medicum Lund Offices 570 11,600 2021-Q3 Lund University Handels Hörne Gothenburg Education 470 6,200 2023-Q1 University of Gothenburg Tomteboda Stockholm Education 360 4,100 2020-Q2 Akademiska Hus Maskinteknik LTH Lund Education 350 — 2022-Q2 Lund University Polstjärnan student housing Luleå Residential 177 6,400 2020-Q1 Akademiska Hus1 Hydra student housing Uppsala Residential 175 — 2020-Q1 Akademiska Hus1 IKSU campus hotel Umeå Other 170 6,700 2021-Q2 Akademiska Hus1 Aila student housing Kista Residential 111 2,600 2019-Q1 Akademiska Hus1 Projects < SEK 100 million 359 Total 3,700 64,000

1) Student housing to be managed and rented out by others.

AKADEMISKA HUS | ANNUAL REPORT 2017 DESCRIPTION OF BUSINESS Projects 27

PROJECT PORTFOLIO

SEK m 31 Dec. 2017 31 Dec. 2016 The different investments are categorised as: Decided projects 13,000 13,400 • Decided projects. Planned projects 3,700 3,330 • Planned projects – have an inquiry or planning DECIDED AND PLANNED PROJECTS 16,700 16,700 framework, where some form of agreement exists between the Company and the tenant. of which already invested in projects in progress –5,700 –4,800 • Concept projects – projects likely to be carried out REMAINDER OF DECIDED AND PLANNED PROJECTS 11,000 11,900 within five years. Concept projects 9,800 7,600 TOTAL REMAINING PROJECTS 20,800 19,500

Total project portfolio 26,500 24,300

Akademiska Hus’ project portfolio is divided into approved, planned Building student housing has been part of Akademiska Hus’ expanded and concept projects and totals SEK 26,500 million, including SEK remit since 2014. Examples include projects in progress such as KI 5,700 million that has already been invested. Our approved projects Residence and student housing at Teknikringen at the Royal Insti- are dominated by the two major projects in Stockholm – Biomedicum, tute of Technology. Student housing projects can also be found in the which will be completed in 2018, and Albano, where the first phase will categories planned and concept projects for a total of SEK 3,300 mil- be commissioned in 2021. Both projects will have long lease terms (25 lion. In addition, we could potentially contribute with additional and 20 years, respectively). The majority of new construction projects investments up until 2021. in our project portfolio have an average lease term of 10 to 25 years. Below are some of the projects in our project portfolio.

Humanisten, Gothenburg Medical Biology Centre, Umeå Activity: Education and research Architect: KUB Arkitekter Activity: Education and research Architect: LINK Arkitektur Tenant: University of Gothenburg Completion: 4th quarter, 2019 Tenant: Umeå University Completion: 1st quarter, 2020 Project description: The new Humanisten building will provide oppor- Project description: The oldest building on the Umeå Campus, the tunities to co-locate the activities of the Faculty of Arts, which were Biology Building from 1961, will undergo total renovation in a redevelop- previously scattered around the city.The project involves both the reno- ment and extension project. The aim is to gather the Faculty of Health vation of and addition to the existing Humanisten building and can be Sciences and part of the cutting edge medical research under one roof. viewed as a first step in the effort to make the campus south of Göta- The new centre represents a major investment in an interactive and platsen a unique and creative meeting place for art, culture and the dynamic research and education environment that promotes an interna- humanities in Gothenburg. tionally competitive operation.

Valla Student Building, Linköping Biomedicum, Solna Activity: Classrooms and lecture halls, library and study areas Activity: Medical research Tenant: Linköping University Tenant: Karolinska Institutet Architect: White Arkitekter Architect: Berg Arkitektkontor/Arkitekfirmaet C.F. Møller Completion: 3rd quarter, 2019 Completion: 2nd quarter, 2018 Project description: The new student building will become a natural Project description: When Biomedicum celebrates its grand opening meeting place for students, with study areas and a library in attractive in 2018 it will be one of the largest research labs in Europe, with an surroundings.The new building will meet high energy efficiency require- ultramodern laboratory facility with room for 1,700 researchers.The pro- ments and have a clear goal to meet the standards for Miljöbyggnad ject began in 2013 and is Akademiska Hus’ single largest construction certification at the gold level. project to date.

AKADEMISKA HUS | ANNUAL REPORT 2017 DESCRIPTION OF BUSINESS 28 Projects

ANALYSIS OF PROJECT PORTFOLIO SEK 5,700 million had already been with unchanged yield requirement and cost Akademiska Hus’ project portfolio, with invested. The annual investment rate is of capital. Our equity ratio remains strong investment projects that will be completed expected to remain at approximately SEK and we believe that return on capital will over the next few years, is extensive and 3,000 million. Compared with previous gradually increase as new investments begin entails a major addition to Akademiska Hus’ years, our project portfolio has never been to produce returns. Profit before tax is property holdings. Demand for new prem- larger than at the end of 2017. Planned and expected to continue to be stable. ises is greatest in those centres of education approved projects largely consist of high- Changes in property values, acquisition that focus on research. The investment tech research facilities and new construc- and sales are not included in the budget or portfolio includes new construction and tion projects for tomorrow’s learning envi- forecast. redevelopment, as well as upgrades to exist- ronments. ing properties. The emphasis in the project portfolio can be found in Stockholm and BUDGET AND FORECAST Gothenburg, though projects can also be Each year Akademiska Hus formulates a found in all of our larger towns and cities. budget for the following year and a forecast As the investments are gradually completed, for the next two years after that. By doing so AKADEMISKA HUS it is expected that the average remaining we ensure that our operations are run with PROJECT PORTFOLIO lease term will increase, since the properties a focus on efficiency and a cost-conscious that are being added to our property hold- approach. Net operating income is invested ings have long leases. The project portfolio in our project portfolio. contains the approved projects of SEK The yield excluding properties under 16.7 13,000 million that will expand our holdings construction is expected to remain at the SEK BILLION over the next few years. At year-end, about same level as today, around 5.5 per cent,

FORECAST Forecast Forecast Forecast 2017 2018 2019 2020

PROPERTY HOLDINGS Average rentable area, 1,000 m² 3,256 3,318 3,374 3,407 Property values, SEK m 80,444 83,500 86,500 89,000 Net investment in properties, SEK m 2,351 3,000 3,200 2,500

Key figures Net operating income, SEK/m² 1,176 1,189 1,252 1,330 Yield, properties, % (excluding properties under construction) 5.5 5.1 5.2 5.4 Yield, properties, % (including properties under construction) 5.0 4.8 5.0 5.2

Financial key figures Rental revenue, SEK m 5,582 6,000 6,150 6,400 Net operating income, SEK m 3,829 4,000 4,200 4,500 Profit before tax, SEK m 8,311 3,600 3,850 4,100 Equity ratio, % 43.3 43.7 43.9 44.5 Return on operating capital, % 5.9 5.7 5.9 6.0 Return on equity, %1 17.6 7.0 7.3 7.4

1) 2017 includes changes in value of properties. Forecasts for 2018–2020 do not include changes in value of properties.

AKADEMISKA HUS | ANNUAL REPORT 2017 DESCRIPTION OF BUSINESS Property Management 29

Property Management

With property holdings of about 3.3 million square metres, Akademiska Hus works with a strategic and long-term approach to management. Our properties must maintain a high standard for a long time, but at the same time be able to be adapted to meet the changing needs of our customers.

MOST IMPORTANT RIGHT NOW In 2018 we are increasing our focus on the customer even more. Based on good quality everyday deliverables and a close relationship with our customers, we strive to be our customers’ first choice. The customer experience is an explicit focus for Akademiska Hus moving forward and with it our hope to improve the results on the CSI (see page 12).

High quality in maintenance services, customers. Along with our many years of important issue, it should also be used responsible energy consumption and open experience and extensive expertise in prop- appropriately. To maintain an even price communication with both customers and erty management, this provides excellent trend over time, we have a hedging strategy suppliers are crucial for increasing business opportunities for Akademiska Hus to create for electricity extending over several years. benefits and value for our customers. For conditions for sustainable property manage- In addition to steady energy costs, it allows Akademiska Hus, property management is ment while enhancing the value of active us to find long-term solutions to bring new an umbrella term used to cover all the tech- ownership and increasing long-term cus- renewable electricity to the market. nical and financial measures carried out tomer value. In 2018 we are increasing our The combination of good supplier dia- during the life of a building. Our properties focus on the customer even more logue and negotiation, along with effective must maintain a high standard for a long maintenance, provide important conditions time. Our properties consist of offices, high- FOCUS ON SUSTAINABLE for management that generates value for tech research facilities, and various types of PROPERTY MANAGEMENT our customers. It also provides us with a classrooms and lecture halls. Versatility, The heating, cooling, water and electricity good overview of future cost trends while flexibility and adaptability are therefore costs of our properties account for about 40 achieving a high standard of reliability. crucial for effectively working with strategic per cent of our operating and maintenance We therefore strive to establish long-term management of our properties. Akademiska costs. Since the costs are largely directly relationships with suppliers, along with Hus’ management organisation consists of linked to energy consumption, with elec- energy that is completely fossil-free. 282 employees who take care of our build- tricity the single largest cost component, ings and some of the furnishing and equip- Akademiska Hus is working intensively to SUSTAINABILITY INITIATIVES ment inside the buildings, with a focus on find energy-efficient solutions. A crucial TOGETHER WITH OUR CUSTOMERS service and professionalism. By maintaining component of this strategy involves reducing An important aspect of Akademiska Hus’ a close and continual dialogue with our ten- energy consumption in our current property sustainability efforts entails collaborating ants and other parties who influence the use holdings, but we are also focusing on incor- with our customers in various sustainability of the premises we can provide long-term porating energy-efficient buildings in our initiatives. The aim is not only to reduce the property management while adapting our new developments. amount of energy used, but also to create work to meet the changing needs of our But using less energy is not the only commitment and visibility relating to sus-

AKADEMISKA HUS | ANNUAL REPORT 2017 DESCRIPTION OF BUSINESS 30 Property Management

AKADEMISKA HUS’ ENERGY STRATEGY

OUR CO2 DECLINED BY in existing portfolio

through collaboration REDUCE with customer

2.3% during construction IN 2017

INFLUENCE suppliers AKADEMISKA HUS ENERGY TARGETS CREATE renewable energy

Our energy strategy is based on three elements, each of which has the goal of having an actual influence. We will REDUCE the quantity of delivered energy to one half of what it was in 2000 by 2025. At the same time, we want to INFLUENCE and interact with our energy suppliers to achieve a fossil-free and renewable product. We also strive to ensure that new renewable electricity is CREATED that is equivalent to our needs, which means that we try to find parties for collaboration.

tainability, while leveraging our aggregate the entire property portfolio. The Energy three new solar parks. Our investment in knowledge from different aspects of the Portal is based on a measurement database solar energy is one of our contributions to field. To further raise our level of ambition that is updated regularly with consumption the transition to a fossil free society. Through and show that we truly take energy issues and energy values from an array of measur- such initiatives we make our campuses a seriously, for the past few years we have ing systems. By analysing a building’s energy little greener and create good opportunities launched a variety of initiatives focused performance, our facilities engineers can to focus on energy together with our cus- on sustainability in collaboration with our calculate and implement measures that pro- tomers. Another example of our work with customers. The initiatives are based on a vide benefit, both financially and environ- energy is that we explore the possibility of shared desire to act and invest in sustain mentally. New and often digitised opera- using excess energy from nearby buildings able choices. The objective is to allocate tional technology systems help to streamline during the early stages of development of energy costs between Akademiska Hus and management but also place high demands new buildings. This strategy enables us to our customers so that both parties have an on the skills of our facilities engineers. reduce the need for energy delivered. Our incentive to improve energy efficiency for properties shall have well-designed, energy the aspects over which each party has con- AKADEMISKA HUS’ ENERGY efficient systems and maintenance solu- trol. In practice this means that as property INITIATIVES IN 2017 tions. In order to achieve our goals, the owner, in most cases, Akademiska Hus has Based on Akademiska Hus’ energy strategy management and the Board of Directors of the greatest control over the building’s and our ambitious sustainable development Akademiska Hus, as well as mid-level man- utilities (heating, cooling and some of the goals, we aim to halve the amount of energy agers and the maintenance organisation, are

electricity). delivered by 2025 and to eliminate the CO2 all involved in follow-up and assessment of footprint of our operations. A crucial com- the results of the energy strategy. ENERGY PORTAL AND DIGITAL ponent of this strategy involves reducing OPERATIONAL TECHNOLOGY energy consumption in our current prop- Ambitious energy savings goals, along with erty holdings, but we are also focusing on management responsibility for a variety of creating renewable energy. In 2017 we complex buildings, place high demands on equipped Naturvetarhuset on the Umeå facilities engineers as well as on effective Campus with an 800-square-metre solar tools and processes. To assist in this endeav- park. It produces 120,000 kWh annually, our we have our Energy Portal, a key tool in which supplies 20 per cent of the building’s Akademiska Hus’ facilities operations that energy needs for operations. Campus Valla was developed to monitor energy savings for in Linköping has also been expanded with

AKADEMISKA HUS | ANNUAL REPORT 2017 DESCRIPTION OF BUSINESS Property Management 31

Market-based rents and transparent rental model

With its leading position on the property market, Akademiska Hus is responsible for deliverables to customers and for local rental market trends, for which reason our rents are always market-based. We always strive for transparency and engage in open tenant negotiations.

Internal rent Market rent level Market rent The rent that Akademiska Hus charges the centres of education is usually Akademiska Hus divided among the various departments rents comprise a of the colleges and universities within Market costs basic rent that is each centre of education, along with intended to cover • Operation and maintenance other expenses for facilities, which are operating, main- • Land Value not charged by Akademiska Hus. The tenance and cap- • Construction Cost departments are then charged an inter- ital costs, and nal rent that often also includes costs sometimes a for central premises, such as communal supplement for spaces. Sometimes the internal rent also tenant adapta- includes supplements for equipment, Market risks tions. security and cleaning. The internal rent • Financing • Location that departments pay per square metre • Property • Counter-party can therefore be higher than the price per square metre that Akademiska Hus has agreed with the centre of education.

Akademiska Hus operates in an open mar- strive for openness in negotiations with ket and our rents are competitive. We set customers, and through our experience Detailed information about our rents the same way that other property and long-term relationships we can often rent levels per building can be found in our property companies do, which means that our calcu- find solutions to use premises wisely and specification at akademiskahus.se lations reflect the risk and costs associated efficiently. with, for example, construction and management. Other factors include the general market rent level of the local community, along with the location, type of building and lease term of the property. STABLE COST OF PREMISES FOR SWEDEN’S CENTRES OF EDUCATION, % To compare rental prices charged by % Akademiska Hus in relation to those charged 15 by other property owners in a comparable portfolio, analyses are carried out regularly 12 with assistance from an external valuation 9 We customise plans on company. Transparency in how we set rents customer request, at 6 is important in our dialogues with the cus- the same time that we improve them to achieve tomers. Following a review of the rental 3 lower energy requirements and reduced operating model, the standard costs for administra- 0 costs. 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Year tion and operation, the standard risk assessment for vacancy at the end of the rental period and the cost of capital during con- Source: Swedish Higher Education Authority statistics database struction have fallen in recent years. We

AKADEMISKA HUS | ANNUAL REPORT 2017 MARKET 32 Market development and competition

Our college and Luleå

Luleå university cities Luleå

Umeå Luleå Luleå

Luleå Luleå

AKADEMISKA HUS CAN BE FOUND IN Gävle

Gävle 16 Gävle Uppsala COLLEGE AND UNIVERSITY CITIES Karlstad Stockholm Örebro Karlstad Gävle Norrköping Karlstad SkövdeGävle Örebro PresenceÖr inebr ocities Norrköping Linköping Skövde Gothenburg Norrköping with goodSk övdgrowthe Borås Karlstad KarlstadAkademiska Hus has a 61 per cent share of Gävle Gävle premisesÖr forebr highero education and research, Örebro which means it is the single largest partici- Norrköping pant in thisSk övdsegment.e The Bortotalås property value NorrkLundöping Skofövd Akademiskae Hus’Bor åsholdings is SEK 80 billion, Kristianstad Karlstad Karlstadwith 95 per cent located in university cities Alnarp and 5 per cent in college towns. Örebro Örebro Kristianstad Population growth >1% Malmö Kristianstad Population growth <1% Alnarp Norrköping Norrköping Skövde Skövde BoråsAlnarp Population decline Borås Malmö Source: Statistics Sweden Malmö

Kristianstad Kristianstad Alnarp Market value Largest centres Market value Largest centres AlnarpShare, per city/town and area of education Share, per city/town and area of education Borås Borås Malmö MalmöStockholm Stockholm Lund Lund University SEK 36 billion University SEK 7 billion Karolinska 906,000 m² InstitutetKristianstad 359,000 m² KristianstadRoyal Institute Alnarp Alnarp of Technology Linköping Malmö Malmö Stockholm Göteborg Uppsala Lund UmeåLinköping Uppsala Stockholm Göteborg Uppsala UmeåLund Umeå Umeå University SEK 14 billion UniversityUppsala SEK 4 billion Swedish Univer- Swedish Univer- sity of Agricul- 609,000 m² sity of Agricul- 231,000 m² tural Sciences, tural Sciences, Umeå Ultuna Linköping Stockholm Göteborg Uppsala Lund UmeåLinköping StockholmGothenburgGöteborg Uppsala UniversityLund of LinköpingUmeå Linköping SEK 8 billion Gothenburg SEK 3 billion University Chalmers 348,000 m² University of 221,000 m² Technology Linköping Linköping Stockholm StockholmGöteborSource:g SwedishGötebor NationalUppsalag Financial ManagementUppsalaLund Authority LundUmeå Umeå

AKADEMISKA HUS | ANNUAL REPORT 2017 MARKET Market development and competition 33

Education sector

EDUCATION AND RESEARCH GOVERNMENT GRANTS The number of applicants to universities and colleges is on a histori- Sweden’s colleges and universities are financed by both government cally high level, though with a slight decline in recent years – despite grants and external funding. The level of grants for education pur- the favourable trend on the labour market. While 19-year-olds are poses is based on the number of students and their accomplishments. still the largest age group among applicants, the ages of applicants Grants are also awarded for research and education at the postgradu- without previous higher education has changed in recent years. ate level. According to UKÄ’s 2017 annual report, total revenue at First-time college applicants are older now. higher education institutions increased by SEK 2.1 billion between The Swedish Government has set clear research policy goals; 2015 and 2016. Increased revenue for research and education at the for example, Sweden shall be an attractive country for international postgraduate level account for the majority of this increase, for a investments in research and development, and that public and total of SEK 1.8 billion. private investments in research should continue to exceed the EU target of 3 per cent of GDP. In 2015 Sweden, Austria, Denmark, STRONG POSITION Finland and Germany were the EU countries that invested most Akademiska Hus has a market share of 61 per cent in premises for in research and development. higher education and research. Its presence is strongest in the large In 2017 the Swedish Higher Education Agency (UKÄ) conducted well-established university cities. These cities account for approxi- an analysis of strategies for distance education at higher education mately 70 per cent of total rental revenue. Investments in new con- institutions, which revealed the importance of educational and tech- struction, redevelopment and extensions are primarily attributable nological developments. The trend is also viewed as a future oppor- to the Stockholm region, Gothenburg and Uppsala. One emerging tunity for expanding recruitment of talent and for lifelong learning. area is our contribution to building student accommodation, which Future challenges include the high cost of development and financ- is in line with the objective of developing more attractive campuses. ing of distance education. Despite the slowly growing competition in the field of community The overall picture of continued pressure from the high number properties, there is no corresponding national player in the segment of applications to universities and colleges, a strong political focus premises for higher education and research, but mainly local and on investment in research, and growing interest in distance educa- regional players. tion shows that there is still a great need for competitive research and education environments.

19–23-YEAR-OLDS IN THE POPULATION 2006–2017, OTHER PARTICIPANTS IN THE MARKET SEGMENT FORECAST 2018–2030 Location Participants1 Thousands Stockholm Clara Foundation 800 Fysikhuset Stockholm KB 2017 Fastighets AB Telefonfabriken 600

400 Gothenburg Chalmersfastigheter AB Hantverks- och Industrihus i Göteborg AB 200 Higab AB

0 2006 2010 2020 2025 2030 Year Uppsala National Property Board County Council Service in Uppsala County Source: Statistics Sweden

Lund Fastighets AB ML 4 National Property Board Hemsö Landsdomaren KB

Umeå Balticgruppen Design AB Universitetshallen Foundation

Linköping Region Östergötland Universitetshallen Foundation

1) Other participants in our market segment are reported in square metres and presented in descending order

Source: Swedish National Financial Management Authority

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT 34 Trends

Administration Report

TRENDS PROPERTY MARKET The global economy has continued to strengthen during the year. Interest in the Swedish property market continues to be strong, The absence of underlying inflationary pressures has encouraged driven by the robust economy and the prevailing low interest rate several central banks to continue with powerful monetary stimulus environment. The volume of transactions has been at historically measures, which have been a strong driving force for the strong per- high levels since 2014, though this figure fell during the year com- formance of the stock market. Rising optimism continued among pared with 2016, when a single large transaction affected the com- businesses and households during the year in response to the pro- parative figures. In total, transactions with a value of approximately longed period of rising asset prices combined with strong labour SEK 150 billion were completed in 2017. This activity included the markets. The improved economy also benefits emerging economies, majority of segments in the Swedish property market, where domes- where rising commodity prices contribute to prosperity. The eco- tic participants accounted for the majority of the transaction volume. nomic boom in China continued in 2017, but the growth rate is However, the share of foreign investors did increase somewhat dur- expected to decline moving forward, albeit from high levels. ing the year and totalled almost one quarter. This interest is sup- The recovery has made greater progress in the US than in the ported both by the weak Swedish krona and because the Swedish Eurozone, but even there the year was characterised by improved property market is expected to show stable cash flows. Good pros- labour market conditions and the increasing economic activity is pects for selling the properties is yet another positive factor with spreading across more countries. Hopes for greater EU cooperation an investment horizon of up to about ten years. Completed transac- have been raised again, especially since both the German federal tions indicate that yield requirements were even lower during the election and the French presidential election have now passed with- year, where the prevailing low interest rate environment is a signifi- out any surprising influence from EU-critical votes. In Sweden, cant driver of the real estate market. growth is good and employment will continue to increase. Exports Strong growth and improved labour market conditions create are benefiting from improved global demand and the weak SEK, good prospects for strong demand for offices, with declining vacancy while high activity levels in the construction sector contribute to rates and rising rent levels as a result. This trend is strongest in the growth. metropolitan areas and contributes to continued investment in modernisation of the existing portfolio as well as new production. FINANCIAL MARKETS There is a clear trend for tenants to increasingly demand modern, The central banks have played a crucial role for the mood in financial space-efficient and environmentally friendly premises that meet high markets. Low unemployment in the US prompted the US Federal technical standards. With the risk that the favourable conditions in Reserve (the Fed) to implement three rate hikes in 2017, while a the fixed income market will likely be replaced by tightening meas- reduction of the balance sheet, which grew as a result of its extensive ures, the housing market will probably simmer down somewhat bond purchasing programme, has been launched. moving forward. The monetary policy normalisation process has made greater progress in the US than in Europe. While the improved economy in COMMUNITY PROPERTIES Europe in general and in Sweden in particular justifies tightening of Interest in community properties continues to be strong. This trend the expansionary monetary policy, navigation toward the inflation is due to demographic factors, where a growing population increases target does not allow any change of course in the policies of either the need for public sector investments in health care and education, the European Central Bank (ECB) or the Riksbank. Prior to 2018 the and the trend is therefore most obvious in the fastest growing com- ECB extended its bond purchasing programme for another nine munities. Demand is also high for premises for higher education and months, albeit at a slower pace than previously. The Riksbank decided research, which comprise a sub-segment of community properties. not to increase its bond purchasing programme at the December International competition is driving the trend towards full-scale meeting, but its presence in the market will still be noticeable when campuses with services, housing, public transportation and an inte- upcoming bond maturities in 2019 are reinvested in advance. The grated business community. The digitisation trend requires prem- importance of not jeopardising the recovery in inflation by a stronger ises that meet high technical standards, which is an additional SEK was underscored and opportunities for the ECB to tighten incentive for continued investment. Premises for higher education monetary policy are considered limited. typically have long leases, creditworthy tenants and relatively low Interest rates for Swedish and European bond yields were dependence on the economy, all factors that help to make them largely unchanged during the year. Short interest rates were held attractive. Growth in the value of properties correlates with the down by negative policy rates, which resulted in continued steep overall market, albeit to a somewhat milder extent, and the declin- yield curves. In the US, however, the tightening of monetary policy ing yield requirements are evident in this segment as well. has led to an extremely flat yield curve, though its implications are difficult to interpret.

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT Customers and contracts 35

Long-term contracts with creditworthy tenants

The majority of Akademiska Hus’ revenue, approximately 90 per HIGH LEASING LEVEL cent, comes from colleges and universities. Since colleges and uni- The rentable area of the property portfolio at year-end was 3.3 million versities are essentially government agencies, this customer group square metres with a vacancy rate of 4.2 per cent (3.9). The financial has the highest credit rating. Substantial investments are required vacancy rate, measured in the rental value of vacant premises, is much to meet customer needs for facilities. Long leases are required to lower and totalled 1.0 per cent (0.9). The largest blocks of vacant ensure that the investments are repaid within the contract period. space remained unchanged during the year and can be found on the During the year the average lease term for new leases was 10 years Ultuna Campus. They amounted to about 78,000 square metres, (10). At year-end, the average remaining lease term for all properties including 30,000 square metres at Klinikcentrum (the Clinical was 6 years (6). Currently, government approval is required for a Centre). The occupancy rate is high compared with the sector at public university or college to sign a lease of 10 years or longer. large, since leases are usually signed before new projects can begin.

TENANT CATEGORIES

Colleges and universities, 87% Chalmersfastigheter AB, 3% Publicly financed operations, 4% Other, 6%

LOW LEVEL OF VACANT SPACE, % LONG-TERM CONTRACTS, SEK M

5 1,000

4 800

3 600

2 400

1 200

0 0 09 10 11 12 13 14 15 16 17 Year 18 19 20 21 22 23 24 21 26 27 28 29 30 31 32 33 34 35 36 37 38 39Year

% of area Maturity structure on leases % of rent

AVERAGE REMAINING LEASE TERM, years 10 LARGEST CUSTOMERS, ANNUAL RENT, DECEMBER 2017 SEK m % 8 Lund University 588 10.3 7 Karolinska Institutet 550 9.6 6 Uppsala University 544 9.5 5 Royal Institute of Technology 522 9.1 4 Uppsala University 509 8.9 3 2 University of Gothenburg 357 6.2 1 Swedish University of Agricultural Sciences 354 6.2 0 Linköping University 322 5.6 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Year Umeå University 258 4.5 Karlstad University 193 3.4 4,195 73.4

AKADEMISKA HUS | ANNUAL REPORT 2017 VHC, SLU, Ultuna 36

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT Five-year summary 37

Five-year summary 2017 2016 20158 2014 2013 Income statement, SEK m Property management income 5,806 5,666 5,646 5,681 5,588 Operating costs –784 –764 –771 –808 –889 Maintenance costs –615 –686 –618 –621 –668 Property administration –309 –294 –316 –326 –272 Net operating income 3,829 3,667 3,740 3,717 3,506 Central administration costs –67 –85 –72 –46 –73 Net interest income/expense –188 –308 –347 –391 –397 Earnings before changes in value and taxes1 3,574 3,274 3,321 3,280 3,036 Change in value, properties 4,979 3,682 2,655 3,529 232 Change in value, financial instruments –242 –241 165 –548 7 Profit before tax 8,311 6,714 6,141 6,261 3,275 Profit for the year 6,453 5,148 4,780 5,215 2,568 Statement of financial position, SEK m Fair value, properties 80,444 73,013 66,575 61,437 57,557 Other assets 10,113 9,417 7,858 8,282 5,785 Equity 39,186 34,152 30,271 33,432 29,614 Interest-bearing loans 34,740 32,756 28,399 23,124 22,175 Other liabilities and provisions 14,347 12,651 13,331 10,205 9,868 Cash flow, SEK m Cash flow from current operations 2,121 2,721 2,024 3,161 3,060 Cash flow from investments –2,341 –2,548 –1,731 –439 –2,459 Cash flow before financing –220 172 293 2,722 601 Cash flow from financing 1,330 893 –546 –853 –1,159 Cash flow for the year 1,110 1,065 –253 1,869 –558 Property-related key figures Total yield, properties, % 12.5 11.4 11.0 13.4 7.2 of which direct yield, %2 5.5 5.7 6.4 6.9 6.8 of which change in value, % 3 7.0 5.7 4.6 6.5 0.4 Rental revenue, SEK/m² 1,715 1,697 1,710 1,715 1,664 Operating costs, SEK/m² 241 237 242 252 276 Maintenance costs, SEK/m² (including tenant adaptations) 189 212 194 194 208 Net operating income in relation to administration income, % 66 65 66 65 63 Net operating income, SEK/m² 1,176 1,135 1,174 1,160 1,089 Level of vacant space, area, % 4.2 3.9 3.8 3.6 2.1 Level of vacant space, rent, % 1.0 0.9 1.1 1.2 0.9 Fair value, properties, SEK/m4 22,476 20,638 19,238 17,471 16,188 Energy use, kWh/m² 201 204 212 224 231

CO2, kg/m² 9 8 8 11 12 Financial key figures Return on equity, % 17.6 16.3 15.0 15.5 8.8 Return on operating capital, %5 5.9 6.2 6.9 7.3 7.2 Return on total assets, % 10.1 10.8 10.7 10.9 6.1 Interest-bearing net loan liability, SEK m 27,569 26,962 23,924 18,871 19,278 Equity ratio, % 43.3 41.4 40.7 48.0 46.8 Interest coverage ratio, % 871 694 743 671 647 Total financing cost including changes in value, % 1.8 2.2 1.2 5.0 2.6 Loan-to-value ratio, % 34.3 37.0 35.9 30.7 33.5 Internal financing level, % 137 84 132 278 124 Ordinary dividend, SEK m 6 1,393 1,290 1,445 1,374 Additional distribution, SEK m7 — — — 6,500 — Personnel Average number of employees 449 440 409 408 407

1) There is a new heading under the income statement. Changes in value are 6) The Board of Directors will decide on the proposed dividend at its meeting reported separately. See also note 2. on 14 March 2018. 2) Excluding properties under construction. 7) Decision at Extraordinary General Meeting on 19 October 2015. 3) Change in value in relation to average value of properties, excluding projects 8) 2015 figures have been adjusted to facilitate comparison. The reason is the in progress and expansion reserves. change in accounting of tenant improvements. In addition, the distribution 4) Excluding the value of properties under construction and expansion reserves. between property administration costs and central administration has changed. 5) The owner’s yield target is that the return on operating capital, excluding changes in value should be at least 6.5 per cent.

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT 38 Property valuation

Property valuation

Akademiska Hus has a well-designed internal process for property valuation that is quality assured and follows good market practices in the property industry. External valuations and assessments of valuation parameters enhance the reliability of the process.

VALUATION METHODS The fair value of Akademiska Hus’ property holdings is determined PROPERTY VALUE AS AT 31 DECEMBER 2017 on a quarterly basis by means of an internal property valuation covering all of the Company’s properties and projects in progress. The properties have been valued individually without any account being taken of portfolio effects. 80 The primary valuation method is a ten-year cash flow model in SEK BILLION which the cost of capital and yield targets are set using about 150 risk categories based on city, contract length and type of premises. 90 per cent of holdings are assessed using this model; see the diagram below All property valuation involves estimation elements, which custom- for a more detailed description of the cash flow model. Because of arily is associated with some uncertainty. A normal uncertainty range a specific risk assessment, 9 per cent of the holdings are valued in property valuation is +/– 5 to 10 per cent, which for Akademiska according to more individualised cash flow models where the length Hus would be equivalent to approximately SEK 4,000 million to of the calculation period and yield targets are allowed to vary as SEK 8,000 million. needed. Expansion reserves account for 1 per cent of the value and To verify the internal valuation, selected properties are also are valued according to the location price method with exploitation valued each year by external valuation companies. During the year, calculations as a complement. An individual assessment of future 83 valuation buildings at a fair value of about SEK 21,000 million cash flows is conducted for all valuation objects that undergo cash were valued externally, corresponding to approximately 26 per cent flow valuation with respect to factors such as changes in rent levels of Akademiska Hus’ total fair value. The valuations were carried out and market rents, vacancy rates and property costs. by NAI Svefa AB, which is authorised by the Swedish Society of Real The valuation methods comply with good market practice in the Estate Economics. The external valuations confirm the reliability of property industry and the cash flows and yield targets that are used the internal valuation model. are justified based on both property-specific and industry-specific conditions. RESIDUAL VALUE RISK The risk exposure in Akademiska Hus’ property portfolio has Akademiska Hus operates in a specific segment of the property mar- primarily been reflected by variations in yield targets, which is a ket, which means that a substantial share of our property holdings central measure of risk in the property sector. Each year Akademiska are more adapted to specialist uses and consequently they have a Hus allows the yield requirement, cost of capital and other valuation slightly more uncertain residual value than for more general proper- conditions to be verified by external independent valuation agencies. ties, such as office buildings and residential buildings. Residual risk Read Note 16 for a more detailed description of Akademiska Hus’ for our customised properties is quantified mainly in the form of valuation methods. charges to cash flow and in the direct yield target.

CASH FLOW MODEL DISTRIBUTION VALUATION METHODS

Cash flow method, 90% Other valuation method, 9% No. of years 1 2 3 4 5 6 7 8 9 10 11 Location price method (expansion reserves), 1% Total present value of cash flows Present value + of residual value Cost of capital = Fair value

The yield target is used to capitalise the cash flow for the remaining period.

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT Financing 39

Financing

The liability portfolio is financed via the public financing programme and primarily in the bond market. Akademiska Hus has had a long-term rating from Standard & Poor’s of AA since 1996 and the highest short-term rating of P-1 from Moody’s since January 2017.

LONG-TERM FINANCING Since the mandate for the maturity of cost-effective source of funding, have been AND EXPANDED INVESTOR BASE currency interest-rate swaps has been good during the year. The ECP programme ECB and the Riksbank, like the larger central extended to 30 years, Akademiska Hus has has therefore been used at a relatively high banks, have implemented extensive mone- been able to take advantage of these oppor- level, though it has been adjusted down- tary stimuli with low key interest rates and tunities. The long-term foreign issues are wards somewhat as a result of high activity extensive bond purchasing programmes swapped for a floating rate denominated in in the bond market. The Swedish commer- aimed at achieving the inflation targets. The SEK with a fixed cost for the credit risk pre- cial paper programme has not been used low absolute level of interest rates, and the mium for the entire term. Given the market since the second quarter. Committed credit prolonged period of low interest rates, have situation, the interests of both investors facilities of SEK 3,000 million have been brought new challenges for participants in and Akademiska Hus have coincided over retained. Combined with the extensive the fixed income market. The ECB’s ongoing the past year. Akademiska Hus’ additional bond issuances, as well as the quarterly bond purchase programme includes not only cost for long maturity has therefore been rental payments, access to liquidity has government bonds but also covered bonds limited. been very good. and corporate bonds. The bond market has During the year SEK 7,100 million were thus been drained of significant volumes of issued in the bond market. One valuable bonds, which are now “locked away” in the contribution to diversification has been the central bank’s balance sheet. The supply of long-term bonds denominated in SEK corporate bonds has thus been insufficient, bought by Asian Investors. Foreign investors for which reason credit risk premiums have accounted for SEK 5,600 million of the (credit spreads) continued to fall during the issuances. In addition to Asia, the investor year. This situation has in turn triggered base is resident in Central Europe and Swe- investor demand for corporate bonds with den; please see the table below. Akademiska longer maturities from borrowers with good Hus also received long-term financing from creditworthiness. Nordic Investment Bank (NIB) during the Consequently, both Central European year. The loan, which partially funds four and Asian investors have shown great inter- projects, is for SEK 1,000 million and has a est in Akademiska Hus’ long-term bonds. maturity of 12 years, will thereby help to The long-term perspective in the property further diversify the liability portfolio. management justifies long maturities in the Akademiska Hus’ primary short-term liability portfolio, for which reason priority funding source is the ECP programme. has been given to these long-term bonds. Conditions for short-term funding, a highly

LONG DEBT MATURITY STRUCTURE, SEK bn BOND ISSUES AND LONG-TERM LOANS 2017 35 ECP Average 30 maturity, EMTN CHF Geographic market SEK m years 25 Asia EMTN övrigt 1,550 19.8 20 Central Europe EMTN/EMTN SEK 1,950 21.8 15 Switzerland 2,100 12.1 Övrigt 10 Sweden 1,500 7.0 Total bond 5 issues 7,100 15.4 0 Nordic Investment 18 20 25 30 35 40 45 47 Year Bank (NIB) 1,000 12.0

ECP EMTN CHF EMTN other MTN/EMTN SEK Other Total long-term financing 8,100 15.0

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT 40 Financing

OUTLOOK FOR FINANCING STRATEGIES AND GOALS Systematic risk analyses are carried out ACTIVITIES IN 2018 Akademiska Hus pursues active debt to support effective management of the While the global economy continued to management, where the strategy is to financial risks and to take advantage of grow at a good pace as 2018 began, the weigh up the financial risks, given the exist- opportunities in the financial markets. environment is also characterised by sur- ing mandate, against the desired low and Two key policy documents support debt prisingly low inflation and similar inflation stable financing cost over time. The stability management; the financing policy and the expectations. Financial markets have not and continuity typical of the property busi- plan for handling financial risks (risk plan). yet priced in either significant tightening ness are also reflected in debt management. Both documents are adopted annually by of monetary policy, or that robust growth Akademiska Hus has had a long-term rating the Board of Directors. will trigger an upswing in long-term inter- of AA with stable outlook from Standard & est rates. The period of extremely low Poor’s since 1996, which was complemented • Financing policy: Describes the long- interest rates has been prolonged and the in January 2017 by the highest short-term term strategic orientation, the Group’s time for a shift in monetary policy is likely rating of P-1 from Moody’s. Financing takes approach to financial risks and the man- approaching. Market reactions may be place mainly through well-established date to handle these risks, as well as the significant when pricing the new interest public financing programmes, primarily allocation of liability. rate scenario. through the EMTN and ECP programmes. Akademiska Hus’ investment rate in Building on a strong financial position, • Risk plan: Justifies and proposes annual its own project portfolio remains high and creditworthy tenants and extremely good mandates for financial risk management is expected to amount to about SEK 3,000 ratings, the debt management objective is in light of the risk scenario and opportu million in 2018. Cash flow from operations to continuously achieve well-diversified nities in financial markets. will be able to fund investments during the access to cost-effective financing in relevant year with a good margin. As a result of the markets. extensive long-term financing of SEK 8,100 million raised in 2017, maturing bonds of SEK 4,400 million in 2018 are already refinanced. The restructuring and extension of the liability portfolio, which increased after the additional distribution, is therefore already completed. Prior to 2018 the mandate for the proportion of loans maturing within 12 months was adjusted down from FINANCING PROGRAMMES AND RATING Rating 45 to 40 per cent. In the event that demand Standard & Rating Framework Utilised nom. for long-term bonds should continue, there Poor’s Moody’s 31 Dec. 2017 31 Dec. 2017 is capacity for more issuances in order to Committed credit facilities in bank SEK 3000 m — further extend the maturity profile. Commercial paper A1+/K1 SEK 4,000 m — Debt management will continue to focus ECP (Euro Commercial Paper) A1+ P-1 EUR 1,200 m EUR 496 m on liability portfolio diversification, by MTN (Medium Term Note)1 AA SEK 8,000 m SEK 770 m broadening the investor base and further EMTN (Euro Medium Term Note) AA/A1+ EUR 3,000 m EUR 2,811 m developing financial risk management. As 1) Not updated since 2009. a result of the massive stimulus measures from central banks, the low interest-rate environment will continue and the risk DIFFERENT FINANCING SOURCES, SEK BN scenario in the fixed income market is

expected to continue to be asymmetric for 40 Akademiska Hus in its role as a borrower. Bank Loans 35 The potential for continued low or falling CP 30 interest rates, given the low interest rates 25 ECP that still prevail, is considered to be limited, 20 EMTN CHF while a rise in interest rates is likely to be 15 both rapid and extensive. Interest rate risk Riksgälden 10 is largely being managed through interest EMTN övrigt 5 derivatives, mainly in order to lengthen MTN/EMTN SEK 0 duration. As in previous years, debt man- 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Övrigt agement will focus on allocating interest

rate duration to the periods of the yield NDO Bank loans CP ECP EMTN CHF EMTN other MTN/EMTN SEK Other curve deemed to be effective.

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT Financing 41

MANDATE FINANCIAL interest rate risk exposure in the total port- in 2017. The scope of the issuances has RISK MANAGEMENT folio. One of the mandates for interest rate entailed a downward adjustment of ECP The exposure to financial risks derives from risk therefore relates to the proportion of financing. Overall, the share of loans the capital structure with the distribution the total portfolio that the long portfolio maturing within a rolling 12-month period between loans and equity in that higher may constitute. The index-linked bond decreased and at year-end was barely 30 per debt means greater exposure to financial portfolio entails diversification of the liabil- cent. The diagram below on the right shows risks. One of the owner objectives for ity portfolio and is justified because rental the trend over time. Akademiska Hus reflects this by requiring income from property operations is largely The mandate is reviewed annually or the equity ratio to fall within a range of tied to inflation. For this reason, the index- as needed. External changes may cause the 30 to 40 per cent. linked bond portfolio’s proportion of the mandate to be adjusted to reflect the assess- The main financial risks that the debt total portfolio relates to a separate mandate. ment of risks and opportunities in the finan- management policy addresses involve expo- The main interest rate risk is managed cial markets. The approach ensures that the sure to interest rate and refinancing risk. in the basic portfolio, where the mandate mandate is always relevant and carefully Normally, financial markets price in long- is defined as a range for average duration. considered. term fixed interest periods and maturities at The mandate is currently between 3 and For more information about the man- higher risk premiums. The objective of debt 6 years. The choice of fixed interest period date for the total portfolio and the three management is therefore to balance, over in the basic portfolio and the size of the sub-portfolios, please see the Risk section the long-term, the additional costs of long- long portfolio are of great importance for on page 45. term fixed interest periods and maturities, interest rate risk exposure in the liability and thus limit uncertainty, against savings portfolio. Over the past five years the aver- of more short-term fixed interest periods age fixed interest period in the total liability and maturities, where greater uncertainty portfolio has been relatively long-term, see is accepted. the diagram below to the left. This helps to preserve the stability of overall financing The liability portfolio is allocated as follows: costs over time. • Basic portfolio – ECP, commercial papers, To manage refinancing risk, the aim is to loans, bonds and interest rate derivatives. establish a well-diversified liability portfolio • Long-term portfolio – bonds denominated to ensure that it is possible at any time to in SEK with fixed interest and maturity finance through various creditor categories, terms in excess of 15 years. geographic markets, currencies and maturi- • Index-linked bond portfolio – bonds ties. Debt management in recent years has linked to the real interest rate. therefore focused on broadening the investor base. Market conditions have also been The bonds in the long portfolio contribute such that a desirable extension of duration to an extremely long fixed interest period has been achieved by carrying out the sub- and account for a significant portion of the stantial long-term bond issues, especially

FIXED INTEREST PERIOD IN TOTAL PORTFOLIO, YEARS PERCENTAGE MATURING, %

10 100 Sweden, Limit Loans Maturing in One Year

8 80 Lån som förfaller inom ett år, brutto

6 60

4 40

2 20

0 0 13 14 15 16 17 Year 08 09 10 11 12 13 14 15 16 17 Year

Limit for percentage maturing within a rolling 12-month period Share of loans (gross) maturing within a rolling 12-month period

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT 42 Risks and risk management

Risks and risk management

Akademiska Hus is one of Sweden’s largest property companies with a focus on knowledge environments designed for higher education and research. A prerequisite for creating value and developing our role in society is our ability to manage opportunities and risks.

‘Risk’ in this case refers to a possible impact due to external events. RISKS AND LIABILITY Risk is not unequivocally negative with cost-driving effects, but During the year, the focus clearly concentrated on identifying the rather an expression of uncertainty. There is also usually a positive activities carried out by respective risk owners to manage existing potential that can be leveraged. risks. The process for ensuring the relevance and validity of the risk The mandate from our owner stipulates that operations will be register, which is constantly updated, was further refined and the run on a commercial basis by setting rents that take operating risk most significant risks are continuously managed. Risk management into account. The yield targets will be achieved over time by lever is a continuous process in which clear ownership and general aware- aging opportunities and managing exposure to significant risks. ness of risks in the organisation are crucial for success. Risks identi- A requirement for achieving this is to have a conscious and reasona- fied in this year’s process were analysed with respect to the likeli- ble level of risk-taking along with good internal governance and hood of their occurrence, their potential impact and the ability to control. manage the individual risk. The graphic below presents the assessment of risk areas based on these perspectives. The assessment ANNUAL BUSINESS PLAN PROCESS was carried out taking into account the protection that is already in Each year Akademiska Hus’ Board of Directors addresses the Com- place in the area. pany’s long-term strategy and decides on a new business plan. The business plan takes into account the Company’s overall risks that have been identified, based on its strategy and long-term objectives. Each year the Board of Directors also adopts policy documents such as the Sustainability Policy, Code of Conduct, Financing Policy and Procurement Policy, which are intended to document how the Com- pany manages its risks.

HIGHLY PROBABLE

Fair value, Project risk properties

Political Transparency Income and vacancy risk risk and trust Operation and maintenance LIKELY as well as facilities risk Financial risks Skills supply PROBABILITY Compliance risk Environmental risk

UNLIKELY CONSEQUENCE/IMPACT

VERY LIMITED SERIOUS DISASTER

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT Risks and risk management 43

Strategic risks Operating risks Consist of both external factors and business risks Mainly refer to the risks of financial consequences that cannot be controlled, but whose negative impact and consequences related to trust which ensue from could be limited. shortcomings in internal procedures and systems, as well as operational risks related to management and construction.

Legal risks Financial risks Encompass both ethical positions for our employees Mainly involve exposure to interest rate and and our stakeholders, as well as good knowledge of refinancing risk. the rules and laws that apply in construction and management.

STRATEGIC RISKS ANALYSIS MANAGEMENT

FAIR VALUE The fair value of buildings is influenced by Fair value risk is managed by regularly analysing the risk OF BUILDINGS market trends, yield targets, rent trends and profile and business opportunities of the property portfolio. vacancy rates, as well as redevelopment and Concentrating the property portfolio to university cities pro- Risk of a negative new construction. The assessment in the risk vides good development potential and good sales opportuni- impact on earnings matrix is based on an outlook of 1–3 years. ties. Because lease terms are long, changes in value demon- due to changes in strate less variation when yield targets change. A large share the fair value of of the property portfolio is located in cohesive campuses. properties The Akademiska Hus property portfolio is developed through investments in new construction and redevelopment.

For more information see the Property valuation section on pages 35 and 38.

TRANSPARENCY Trust and good relations can be achieved and To strengthen our ability to inspire trust we work proactively AND TRUST maintained by behaving as a role model and with our values and our corporate culture. During the year with high transparency. Setting rents, planning we trained our staff on diversity issues and implemented a Risk of a lack of trust and development of campuses as well as the process model for sustainability as support for campus devel- from the owner and Company’s sustainability work are areas where opment. We have also introduced a Code of Conduct for sup- other stakeholders our stakeholders demand great openness. pliers with a clear focus on transparency and human rights.

INCOME AND External factors that affect the Company’s Akademiska Hus strives to achieve generally designed facili- VACANCY RISK rental income and vacancy rates include the ties that can be redesigned based on the development needs development needs of the centres of education, of the centres of education. Buildings specially adapted for Risk of loss of income their access to research grants, political deci- research and development often have long lease terms with due to vacancies or sions and economic fluctuations. a high probability of renewal. Investing in properties requires reduced rental income leases to be signed before construction begins. Taken Colleges and universities are primarily State- together, this gives a low risk of vacancy. funded, for which reason the risk of reduced revenue and non-payment is low. In recent Our regional presence and regular dialogue with our years, the interest of private property customers will help to strengthen our position as a supplier companies in community properties, strong of knowledge environments. regional players and increased client demands have contributed to intensified competition.

POLITICAL RISK The operation is affected by Government The risk scenario can be kept up to date through a policies in general and education policy in par- systematic business intelligence analysis. We engage in Risk of changing ticular. A change in this brief from the owner, continuous dialogue with our owner and stakeholders to conditions as a result the Swedish state, could entail both risks and ensure consensus on goals and strategies. of political decisions opportunities.

As a major energy user, changes in national and international energy policies could have an impact on the Company’s financial performance.

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT 44 Risks and risk management

OPERATING RISKS ANALYSIS MANAGEMENT

PROJECT RISK Each year Akademiska Hus invests billions of Investments are not initiated until an agreement is reached SEK to build new and develop existing properties. with the tenant and are regulated contractually regarding This risk relates to Projects are complex and involve many parties both entrepreneur and tenant, for which reason production financial, scheduling for which reason the clarity of agreements and risk is limited. Risks linked to the physical design and imple- and technical impact structured processes are crucial. mentation are limited through structured project briefings. associated with A high level of expertise and structured sustainability initia- project delivery Production costs and decisions related to physi- tives, including efforts to achieve an accident-free workplace, cal design are key for achieving a process that provide higher cost effectiveness and quality. Our suppliers is safe, resource-efficient and cost-effective. must meet high ethical standards since they are required to comply with the Code of Conduct for suppliers.

OPERATION AND A focus on operation and maintenance costs We engage in continual dialogue with our customers to learn MAINTENANCE is important for the net operating income ratio about their activities in order to achieve high operational AS WELL AS of the properties and thus their fair value. reliability and prevent disruptions. FACILITIES RISK Neglected maintenance leads to higher mainte- To ensure high level of operational reliability, each building This risk relates to nance costs in the long term. Several of our cus- has a maintenance plan, which leads to cost-effective main- the effects of poor tomers have facilities with highly advanced and tenance of the properties. operation and mainte- sensitive activities; consequently disruptions in nance, as well break- operations, both temporary and long-term, can Akademiska Hus works actively to hedge future electricity downs in the facility have serious consequences. prices, providing greater security regarding future costs.

Electricity price risk is an area that can have A clear focus on achieving the goal of reducing energy use major financial consequences if not managed by 50 per cent during the period 2000–2025 influences daily wisely. work.

SKILLS SUPPLY RISK Today there is strong competition and high We cooperate with several vocational colleges and training demand for skills in property management as programmes and participate in activities to promote access The risk of not being well as in construction and project management. to the right skills in the industry. able to attract, recruit, We are currently perceived as an attractive retain and develop employer, which is positive and promotes the We actively work to ensure attractive working conditions with staff with the right possibility of ensuring that the right skills are good skills development and duties that encourage growth. skills available. The ongoing process of change with the new organisation causes extra focus on clarity regarding employees’ roles and Broadening recruitment of young people and responsibilities in the organisation. groups that do not normally apply for work in the property business will be crucial to ensure the availability of employees with the right skills over time.

ENVIRONMENTAL RISK When managing and developing campuses, Akademiska Hus works with long-term strategic development as well as in new construction and redevelop- of campuses by formulating campus plans with a strong focus Risk of impact on ment, it is important to plan the change so that on sustainability. the environment and materials and resources are used in a responsi- society ble manner. All new construction and major renovations are environmentally certified according to the Miljöbyggnad system, for at Responsible management, construction and least a silver rating. Materials are assessed with regard to their development of campuses require a long-term impact on the environment through the Byggvarubedömningen approach, good skills and high ambitions. (BVB) scheme. Resource and energy efficiency initiatives are conducted throughout the operation.

The Company is certified to ISO 14001 for the environment and AFS 2001:1 for the working environment.

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT Risks and risk management 45

LEGAL RISKS ANALYSIS MANAGEMENT

COMPLIANCE Akademiska Hus operates in an environment Akademiska Hus’ Code of Conduct offers guidance on how that has historically been affected by corruption we should act. Each year, managers and employees engage The risk that laws and improprieties. Compliance with applicable in a dialogue on compliance with the Code of Conduct. and regulations are laws and regulations affecting our business is In connection with procurement proceedings we also place not followed therefore of particular importance to Akademi- demands on our partners through a Code of Conduct for ska Hus to avoid unnecessary costs and to Suppliers. ensure that we and our partners set a good example. The Company has an ethical council and an external whistle- blower system that is independent of the company, to which Compliance with applicable laws and regulations both employees and external partners can report suspected should be easy and obvious and leave little room irregularities. for interpretation. As a state-owned company, it is crucial to set a good example, in business as In 2017, an extensive analysis was conducted to clarify well as in other relationships. how the new data protection regulation affects handling of personal data in the company’s processes. Changes or adjustments resulting from this analysis are continually implemented.

A new incident reporting system was introduced and a transition to the new ISO 14001:2017 standard began.

FINANCIAL RISKS ANALYSIS MANAGEMENT

INTEREST RISK The additional cost for long-term fixed interest The fixed interest period comprises three parts: is balanced against the increased uncertainty • The long-term portfolio may not exceed 20 per cent of Risk that profit will vary as short-term fixed interest means. the total portfolio because of changes in • The index-linked bond portfolio may not exceed 10 per market rates cent of the total portfolio • The average fixed interest period of the basic portfolio shall be in the range of 3–6 years

REFINANCING RISK The additional cost of long-term maturity is Maturity mandate: balanced against the increased uncertainty Risk that obtaining associated with short-term fixed interest • The proportion of loans maturing within each financing is associated periods. twelve-month period may not exceed 40 per cent of with difficulties or the total portfolio significantly higher costs

COUNTERPARTY RISK Exposure to counterparty risk arises from Exposure to counterparty risk is managed by imposing a limit investment of excess liquidity and from based on ownership circumstances, ratings and the term of The risk of a loss because derivative transactions. the commitment. In derivative transactions, supplementary a counterparty does not agreements to the ISDA (“CSA agreements”) are required, meet its undertakings thereby substantially reducing exposure.

CURRENCY Property operations are conducted in When financing in a foreign currency, the exchange rate risk EXPOSURE RISK Sweden and in Swedish kronor. must be eliminated.

Risk that profit will vary because of exchange rate changes

Sensitivity analysis, see page 62, Note 3 on page 73 and Note 16 on page 82.

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT 46 Corporate Governance Report

Corporate Governance Report

This corporate governance report describes the FOUNDATIONS OF CORPORATE GOVERNANCE AT AKADEMISKA HUS structure and principles for governance of opera- Akademiska Hus (publ) is a property company that is wholly owned tions at Akademiska Hus. With a clear allocation by the Swedish state. Administration is handled by the Ministry of Enterprise and Innovation on behalf of the Ministry of Education of responsibility between different Company and Research, which is the principal. The Company is subject to the bodies and procedures that ensure transparency, State’s ownership policy and guidelines for companies with state the operation is efficiently governed to guide us ownership and applies the Swedish Code of Corporate Governance towards our goals. (the Code). Because the Company is wholly owned by the Swedish state, certain provisions of the Code do not apply, as it is primarily written for businesses with diversified ownership. Deviations from the Code are described on page 48.

Organisational structure

1 General Meeting

2 External auditor 3a Audit and Finance Committee

3 Board of Directors 3b Remuneration Committee

3c Investment Committee Internal auditor 2 (through 31 Dec. 2017)

4 President/management

Common support functions

Campus and Business Development units Management Project unit • North • Mid-Sweden • South unit

AKADEMISKA HUS’ MISSION ACCORDING TO THE ARTICLES OF ASSOCIATION Objective FINANCIAL OBJECTIVES The object of the Company’s operations is to own, develop and manage The General Meeting has properties for colleges and universities, where the primary focus is on adopted three financial objec- education and research, as well as activities compatible therewith. tives for Akademiska Hus. Operations will be run on a commercial basis and generate a yield that Read more SUSTAINABILITY GOALS is in line with the market by setting rents that take into account the on page 12. The Board of Directors has operating risk. Akademiska Hus Aktiebolag shall work to bring about adopted four sustainability long-term sustainable development of university and college campuses. goals for Akademiska Hus.

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT Corporate Governance Report 47

1 GENERAL MEETING authorised public accountant, to serve as lead auditor. The auditors The General Meeting is the highest decision-making body at Akade- perform a limited review of the interim report as at 30 September miska Hus. The shareholder formally exercises influence at the Gen- and audit the annual and consolidated accounts. They also conduct a eral Meeting. The General Meeting appoints the Board of Directors limited review of the sustainability report. In addition, the auditors and auditors. According to the State’s ownership policy, the Annual express their opinions of this corporate governance report and whether General Meeting must be held before 30 April each year. Notice of Akademiska Hus complies with the Government Guidelines for terms General Meetings shall be published no earlier than six weeks and of employment for senior executives, and submit their statements to no later than four weeks prior to the Meeting in Post- och Inrikes the meeting. Every year the auditors review their audit plan and risk Tidningar, as well as on the Company’s website. Members of the assessment with the Audit and Finance Committee. The auditors Riksdag and the public have the right to participate and must regis- participate in at least two committee meetings per year. Each year ter their participation as described in the notice. the auditors attend at least one meeting with the Board of Directors that is not attended by the President. Annual General Meeting 2017 In 2017 the Board of Directors evaluated the structure of the Com- The Annual General Meeting was held on 28 April 2017. The meeting pany’s work with internal control and in November the Board decided was opened by Chairperson of the Board Anitra Steen, who was also to end the internal audit function in the Company at year-end 2017/2018. appointed to chair the proceedings. The owner was represented by The Board of Directors believes that a long-term focused initiative to Malin Fries, Ministry of Enterprise and Innovation. improve processes and procedures is the best way to improve internal management and control. Management will therefore allocate dedi- Decisions at the 2017 Annual General Meeting cated resources to strengthen internal procedures and processes. The Annual General Meeting adopted the income statement and 3 balance sheet for the 2016 financial year and discharged the Board BOARD OF DIRECTORS of Directors and the President from liability for the year. The AGM The Board of Directors is responsible for the organisation and for approved the Board’s proposal for profit distribution, which entails a management of the affairs of the company. The Board of Directors dividend of SEK 1,393,000,000 to the owner. Other matters addressed convenes the Annual General Meeting. Each year the Board of included adoption of the principles for remuneration and other terms Directors adopts Rules of Procedure for its work. The Rules of Pro- of employment for senior executives, resolutions on fees to the Board cedure govern the allocation of work among the directors, the num- of Directors and committees, as well as election of Board members ber of regular Board meetings, matters to be addressed at regular and auditor. The minutes and other documents related to the AGM Board meetings and the responsibilities of the Chairman of the are posted on the Akademiska Hus website akademiskahus.se. Board. The division of responsibilities between the Board and the CEO is regulated by special instructions to the President. The Board Extraordinary General Meeting has also adopted the document “Instructions for financial report- In January 2017 an Extraordinary General Meeting was held to elect ing” which regulates financial reporting procedures to the Board. an additional Board member. Nomination process Annual General Meeting 2018 Directors of state-owned enterprises are appointed through a struc- The next Annual General Meeting will be held on 27 April 2018 in tured nomination process with common uniform principles as out- Stockholm. lined in the “State ownership policy and guidelines for companies with state ownership 2017”. These principles replace the rules in the 2 AUDITORS Code for preparation of decisions for nomination of Directors and The 2017 AGM resolved to re-elect KPMG AB to serve as auditors for auditors. The Board nomination process is co-ordinated by the state a one-year period until the 2018 AGM. KPMG appointed Björn Flink, ownership unit at the Ministry of Enterprise and Innovation. To

Governance structure Examples of external Examples of internal governing regulations: governing regulations: • Companies Act • Articles of Association Code of Conduct • Accounting Act • Rules of Procedure for the • Annual Accounts Act Board of Directors Policies Board • State ownership policy • Instructions to the President Obligatory “What” of Directors • IFRS • Allocation of responsibility • Swedish Code of Corporate and authority Governance • Strategy documents Guidelines Executive • Code about gifts, rewards • Code of Conduct Obligatory “How” Management and other benefits in business • Sustainability Policy, Procure- • UN Global Compact principles ment Policy and Financing Policy • Global Reporting Initiatives • Attestation and authorisation (GRI) guidelines G4 guidelines Instructions Unit and department Guidance • Stock market rules • Rules of Procedure for the “How” manager Board of Directors’ committees • Business ethics guidelines • Other guidelines

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determine potential hiring needs a work group analyses the needs for with meetings with the leadership of these institutions. The attend- expertise based on the Company’s operations, future challenges and ance by the members of the Board of Directors is presented in the the composition of the Board. The requirement for diversity on the tables on page 50. Boards of Directors under the Annual Accounts Act is also observed. Directors are selected from a broad recruitment base in order to take Board committees advantage of the expertise of both men and women as well as among Until 28 April 2017, there were three committees established by the people with different backgrounds and experiences. Upon completion Board of Directors: the Finance, Audit, and Remuneration Committees. of the process nominations are announced in accordance with the The Board of Directors resolved at the statutory board meeting on 28 Code. A consistent and structured approach ensures a high standard April 2017 to establish three new committees: the Audit and Finance of quality throughout the nomination process. Committee (merged into a single committee), the Investment Commit- tee and the Remuneration Committee, in order to specifically monitor Composition of the Board of Directors and prepare Board issues in certain areas. Committee members are According to the Articles of Association, the Board of Directors for elected at the statutory Board meeting held immediately after the AGM. Akademiska Hus shall consist of a minimum of three and a maximum 3a of ten Directors with no deputies. The Board consisted of seven Direc- The tasks of the Audit and Finance Committee are to: tors until the AGM in 2017. The Annual General Meeting on 28 April – Support and follow up financing activities. 2017 resolved that the Board should have nine members elected by the – Prepare matters to be decided by the Board, including Financing AGM. The Board also includes two employee representatives desig- Policy and a risk plan. nated by their respective trade unions. Six members were re-elected – Monitor the Company’s financial reporting and ensuring that it and three new members were elected to the Board at the Annual Gen- maintains a high standard of quality. eral Meeting. The AGM concluded that the Board has the relevant skills – Regarding the financial statements, monitor the efficiency of the to manage the Company and that the Board as a whole has experience Company’s internal control systems and risk management. of areas that are important for the Company such as corporate govern- – Meet regularly with the Company’s auditors to learn about the ance, management, the real estate industry, universities and higher edu- scope and focus of the audit. cation, change and development initiatives, as well as financial expertise. – Remain informed about the audit of the annual accounts and the consolidated accounts. Work of the Board of Directors in 2017 – Establish guidelines for non-audit services that may be procured In its Rules of Procedure the Board set a schedule for information and from the Company’s auditors. decisions during its work year that essentially follows the Board’s – Prepare proposals for the election of auditors at the Annual annual cycle (see below). General Meeting. At all Board meetings during the year the President presents a report on significant events involving the Company and the respec- DEVIATIONS FROM THE CODE NOMINATION COMMITTEE tive committee chairs present reports from the committee meetings (CODE RULES 1.3–1.4, 2.1–2.7, 4.6, 8.1 AND 10.2) The Code has mainly been prepared for companies with a spread that were held between Board meetings. of ownership. At such companies, the election committee is in During the year the Board’s discussions focused on customer ben- the first instance a body for shareholders to prepare decisions efit and deliverables. Other important issues that the Board addressed regarding appointments. For state-owned companies, the rules regarding an election committee are replaced by principles gov- included innovation, digitisation from a customer perspective, student erning a structured nomination process according to the Govern- housing on campus and development of the investment and construc- ment’s ownership policy.

tion process. In addition, a number of investment matters were addressed. REPORTING OF THE INDEPENDENCE OF BOARD MEMBERS In 2017, eleven regular Board meetings were held, including two (CODE RULE 4.5) statutory meetings. To inform and update members about its activi- The purpose of this code rule is to protect minority shareholders in limited liability companies, which is not applicable to wholly ties, some Board meetings are held at the centres of education that state-owned companies. are Akademiska Hus customers and combined wherever possible

BOARD OF DIRECTORS’ ANNUAL CYCLE • Year-end report • Investment matters • Interim report Q3 • Annual Report and Sustainability Report • Investment matters • Principles for remuneration and other terms • Business concept Q4 Q1 of employment for senior executives • Internal Audit plan • Notice of Annual General Meeting • Risk plan • Interim report Q1 • Investment matters • Statutory meeting • Board of Directors’ Rules of Procedure, instructions Q3 Q2 to the President and other policy documents • Interim report Q2 • EMTN prospectus • Investment matters • External analysis and strategy meeting

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT Corporate Governance Report 49

Board of Directors

ANITRA STEEN CAROLINE AREHULT BRITTA BURREAU KRISTINA EKENGREN PETER GUDMUNDSON THOMAS JENNLINGER Chair since 2016. Chair Board member elected Member since 2014. Member since 2016. Board member elected in Employee representa- of the Remuneration in 2017. Year of birth: 1964 Year of birth: 1969 2017. tive (Ledarna union) Committee and Invest- Year of birth: 1973 Position: CEO of KPA Position: Deputy Direc- Year of birth: 1955 since 2008. ment Committee. Position: CEO of Pension. tor at the Ministry of Position: Professor, Royal Year of birth: 1956 Year of birth: 1949 Skanska Fastigheter Other positions: Enterprise and Innova- Institute of Technology. Position: Operating Other positions: Stockholm. Chairperson for the tion. Other positions: manager at Akademi- Chairperson of the Previous positions: Scouts. Other positions: Board member of ska Hus Uppsala. Board for AFA Worked with project Previous positions: Board member Infra- Swerea KIMAB AB, mem- Education: Production Försäkring, and Board and property develop- CEO of Nordea Liv and nord, Teracom Group, ber of the Royal Swedish engineering studies. member of PostNord, ment for 19 years at Accenture. Saminvest and V.S. Academy of Engineering Attendo AB and Oral Skanska and has held Education: M.Sc. Eng. VisitSweden. Sciences. Care AB. positions such as prop- and MBA. Previous positions: Previous positions: Previous positions: erty manager and sales Deputy Director and Vice-Chancellor KTH, Under-secretary at the and leasing manager. Department Secretary Vice Dean KTH, Head of Ministry of Finance, Education: M.Sc. Eng. at the Ministry of Department KTH, CEO State Secretary at the Finance. Financial SICOMP, consultant Tre Ministry of Education analyst at Delphi Eco- Konsulter AB, researcher and Ministry of Finance, nomics. Brown Boveri Research Director General of the Education: Master’s Centre in Switzerland. National Agency for program in business Education: PhD. PhD. Higher Education Ser- administration. and M.Sc. Eng. vices and the National Tax Board, as well as CEO of Systembolaget AB. Chairperson of Stockholm University and Board member of SAS, Södersjukhuset hospital, Lantmännen and others. Education: BA.

ANDERS LARSSON CHRISTER NERLICH GUNNAR SVEDBERG ÖRJAN WIKFORSS INGEMAR ZIEGLER Employee representa- Board member elected Member since 2009. Board member elected Member since 2007. tive (SEKO union) since in 2017. Chairman of Year of birth: 1947 in 2017. Year of birth: 1947 2009. the Audit and Finance Other positions: Year of birth: 1950 Other positions: Year of birth: 1963 Committee. Board member of Position: CEO of Board member of Position: Operating Year of birth: 1961 Uppsala University and Arkitekturanalys AB. Stockholm Concert engineer at Akademi- Position: Chief the Göran Gustafsson Other positions: Hall. ska Hus Stockholm. Financial Officer of Foundation for Scien- Board member of the Previous positions: Education: Production Vasakronan. tific and Medical Royal Swedish Opera CEO of AB Storstock- engineering studies. Other positions: – Research. Member of and Tengbom AB. holms Lokaltrafik, Previous positions: the board of IVA and Member of the board Locum AB, Diösförvalt- Chief Financial Officer KVVS in Gothenburg. of IVA. ning, Stockholms of AP Fastigheter and Previous positions: Previous positions: Mark- och Lokaliserings Corporate finance CEO of Innventia AB, Professor in project bolag. Finance NewSec. Vice-Chancellor at the communication, KTH. Secretary of the City Education: University of Gothenburg, CEO of FFNS Arkitekter of Stockholm. MBA. Vice-Chancellor at Mid and Wikforss Arkitekt- Education: BA. Sweden University, and kontor. Deputy Vice-Chancellor Education: Architect, at the Royal Institute PhD. and professor. of Technology. Education: PhD. in engineering Professor of Energy Technology.

AUDITORS, KPMG AB, BJÖRN FLINK, LEAD AUDITOR Born 1959. MBA. Lead auditor for Akademiska Hus since 2014. Authorised public accountant. Other audit assignments, selection: Hemfosa Fastigheter, Axfast and Stenvalvet. Directorships: Board member of FAR, the trade association for auditors, accounting consultants, and advisers.

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT 50 Corporate Governance Report

3b The tasks of the Remuneration Committee are to: work, the Board formulates relevant policies and governing docu- – Prepare decisions regarding terms and conditions for salaries ments. Akademiska Hus’ long-term strategy, the financial targets and employment for the President and senior executives. adopted by the AGM and the Board’s sustainability goals, serve as – Formulate proposals for guidelines for remuneration and other the basis of the annual process of formulating a business plan. The terms of employment for the President and other senior executives. business plan, along with the policy documents, comprise the overall – Monitor and evaluate the application of the guidelines for remu- basis for control of the Company. neration to senior executives prior to adoption by the AGM. Business planning begins with joint strategy days held by the – Serve as advisory body to the President regarding succession Board and management in the spring and ends when the Board planning and appointment of senior executives. adopts the business plan at its December Board meeting. – Propose appropriate employment contract templates for senior The business plan, which is prepared for the next three years, is executives to the Board of Directors. based on the long-term strategy. The plan describes how Akademiska Hus develops customer relationships, manages assets and addresses 3c The tasks of the Investment Committee are to: future challenges and opportunities. The plan specifies activities to – Prepare and analyse proposals for major investments. be implemented to achieve the strategic goals of the business. It also – Monitor and analyse the Company’s reporting of major projects describes the efforts to achieve the financial goals. A business intelli- in progress. gence analysis that includes customer relationships and delivera- – Assist Executive Management with formulation of an invest- bles, the impact of innovation and digitisation on the Company’s ment strategy. operations and the student housing issue is carried out as part of the planning process. The President, CFO, Human Resources Director, Market Area The business plan, which covers the entire company, is broken Director and Project Manager may participate at committee meet- down into clear operational plans for operational units and support ings in the capacity of presenters. functions. The operational plans include operational objectives and activities to meet the goals. The operational plans are continuously Evaluation of the work of the Board and the President in 2017 monitored with quarterly feedback sessions between management The Board of Directors uses a structured, systematic process to eval- and the coordinator for the respective operational unit and functions uate the work of the Board and the President. Evaluation takes place during which the operational objectives and operational control once a year with the aim of developing the working forms and efficiency parameters are addressed. of the Board of Directors. The chairman leads the evaluation, which is To implement the Company’s strategy and business plan the carried out by all members of the Board. The owner, through the organisation is structured as shown on page 46. On 1 January 2017 Government Offices, is informed about the results of the evaluation. Akademiska Hus implemented its new organisational structure. The The work of the Government Offices related to the Board nomination previous regional divisions were replaced by three main processes, process also includes an ongoing evaluation of the boards of all state- with the Company organised into a Management unit, a Project unit, owned companies, which includes their work, the composition of the as well as three geographic units for Campus and Business Develop- Board and their skills. ment, which has long-term responsibility for customer relations. The purpose is to increase the Company’s development capacity and GOVERNANCE OF AKADEMISKA HUS deliverables. The organisation focuses on the management business The Board of Directors is ultimately responsible for ensuring that and enables the Company to adapt faster and more efficiently to the Company is managed in compliance with laws and regulations, external changes. The Company continues to have a local presence as well as the instructions provided by the owner. As part of this through the existing properties. Coordinated support functions

ATTENDANCE OF THE BOARD OF DIRECTORS – FINANCIAL YEAR 2017 Number of Number of Number of meetings Number of meetings Number of meetings Number of meetings of the meetings of the of the Audit and of the Investment of the Remuneration Board meetings Audit Committee Finance Committee Finance Committee Committee Committee Anitra Steen 11/11 5/5 2/2 Caroline Arehult1 7/7 4/4 Britta Burreau 11/11 1/1 4/4 Kristina Ekengren 11/11 3/3 4/4 2/2 Peter Gudmundson1 6/7 4/4 Thomas Jennlinger 10/11 Anders Larsson 9/11 Christer Nerlich2 11/11 3/3 4/4 Gunnar Svedberg 11/11 2/2 Örjan Wikforss1 6/7 4/4 Ingemar Ziegler 11/11 3/3 1/1 4/5 Olof Ehrlén3 4/4 1/1

1) Elected 28 April 2017 at General Meeting. 2) Elected 17 January 2017 at Extraordinary General Meeting. 3) Left the Board of Directors 28 April 2017.

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Executive Management

KERSTIN LINDBERG GÖRANSSON ULF DÄVERSJÖ President. Employed 2011. Head of Innovation and sustainable Year of birth: 1956 development. Employed 2014. Other positions: Board member of AP3. Year of birth: 1979 Previous positions: Airport Director of Previous positions: Purchasing Director Stockholm-Arlanda Airport, Accounting Akademiska Hus, Management Consultant and Finance Director and Vice President at Capgemini Consulting, and Global of the Scandic Group. Purchaser Arla Foods. Education: MBA. Education: MBA.

HAYAR GOHARY KERSTIN CATARINA FRITZ CATARINA FRITZ LINDBERG GÖRANSSON Chief Financial Officer and Vice President Project Manager. Employed 2007. Employed 2016. Year of birth: 1975 Year of birth: 1963 Previous positions: Project manager for Previous positions: CFO at Keolis Sverige, Vallentuna Municipality. Project manager Frösunda LSS, Addici, Aditro Group, the for Akademiska Hus. Stockholm Stock Exchange and Investor. Education: M.Sc. Eng. Education: MBA. MARIE HALLANDER LARSSON JONAS BJUGGREN Human Resources Director. Employed 2017. Administrative Manager. Employed 2017. Year of birth: 1961 Year of birth: 1974 Previous positions: Human Resources Previous positions: Regional Manager Director for Försäkringskassan, Swedbank AB, Posten AB, Scandic Hotels AB and Wedins AB. JONAS BJUGGREN PETER BOHMAN Vasakronan, market area manager and business unit manager at AP Fastigheter Member of Executive Management since and project manager at Skanska and Sweco. 1 March 2017. Education: M.Sc. Eng. Member of Executive Management since MAGNUS HUSS 1 March 2017. Market Area Director. Employed 1993. Year of birth: 1967 PETER BOHMAN Other positions: Board member of AFF Market Area Director. Employed 2013. Forum. Year of birth: 1972 Previous positions: Project Manager, Head Other positions: Board member of Realus of Property Management, and Property AB and IFU Arena AB. Manager for Akademiska Hus Stockholm. Engineer and facilities technician at the Previous positions: Terminal Manager National Board of Public Buildings. and on-call Airport Director at Stockholm- BIRGITTA VAN DALEN ULF DÄVERSJÖ Arlanda Airport. Various management Education: Engineering degree, technical positions at Swedavia. college. Education: B.Sc. in Business Administration with focus on real estate. CECILIA NIELSEN Corporate Communications Officer Employed BIRGITTA VAN DALEN 2012. Market Area Director. Employed 2005. Year of birth: 1969 Year of birth: 1958 Previous positions: Head of Corporate Communications at SP Sveriges Tekniska Previous positions: Regional Director for Forskningsinstitut AB. Akademiska Hus, Planning adviser for Akademiska Hus, Head of property supply Education: BA. and operating manager at Karlstad Univer- sity, Planning Manager at the Property HAYAR GOHARY MARIE HALLANDER Department, Karlstad Municipal Authority. LARSSON Education: B.A. Soc. Admin.

EQUAL NUMBER OF MEN AND WOMEN IN EXECUTIVE MANAGEMENT 50/50 AT AKADEMISKA HUS.

MAGNUS HUSS CECILIA NIELSEN

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT 52 Corporate Governance Report

were also implemented in conjunction with the reorganisation. In A basic requirement is to act in compliance with the principles of summary, the Company is better equipped to create competitive the UN Global Compact, Agenda 2030, the UN Guiding Principles knowledge environments throughout the country. on Business and Human Rights, the ILO Core Conventions and the OECD Guidelines for Multinational Enterprises. For the Company’s 4 THE COMPANY’S ORGANISATION employees there are also business ethics guidelines based on the President and Executive Management rules in the Code regarding gifts, rewards and other benefits in busi- Executive Management consists of ten members including the Pres- ness. An Ethical Council provides support to employees to which ident. The Company’s General Counsel serves as secretary for the suspected deviations from ethical guidelines or other irregularities Executive Management team. The President, or the Vice President can be reported. Akademiska Hus has also set up an independent (Chief Financial Officer) acting on behalf of the President, is respon- system for whistle-blowing, to which both Akademiska Hus employ- sible for ongoing management in compliance with applicable laws and ees and external parties can anonymously report suspected irregu- regulations and in accordance with the instructions for the President larities. In 2017 the Company received no reports about corruption approved by the Board. In addition to the President, the Executive that led to a police complaint through the Ethical Council, whistle- Management team comprises the Chief Financial Officer, Project Man- blower system or directly to employees. ager, three Market Area Directors, Administrative Manager, Corpo- rate Communications Officer, Head of Innovation and Sustainable IMPORTANT ISSUES 2017 Development and the Human Resources Director, all of whom report • conversion to the Public • social sustainability directly to the President. Executive Management is a forum for Procurement Act • undergraduate and graduate information and decisions regarding joint strategic Company mat- • implementation of new student housing ters. It is also the steering committee for the prioritised processes. organisational structure • increased focus on internal • customer relationships and management and control Operational units deliverables • business ethics The Company’s main processes are conducted within three opera- • digitisation • accident-free workplaces. tional units. The Management unit is responsible for management • innovation and sustainability deliverables with a focus on customer benefit, ensures sustainable and efficient operation, energy efficiency improvements and digitisa- REMUNERATION tion of the property management organisation. The Project unit is • The AGM resolved on principles for remuneration and other responsible for project deliverables, ensuring high standards for terms and conditions of employment for executives. The princi- sourcing and project leadership skills, while creating conditions for ples are in line with the State’s “Guidelines for terms and condi- efficient and sustainable management. The Campus and Business tions of employment for senior executives in state-owned com Development unit is divided into three geographic areas: North, Mid- panies”. Sweden and South. The unit’s primary areas of responsibility include • A fee is paid to the members of the Board of Directors according to strategic customer relationships, development of knowledge and a decision reached at the Annual General Meeting. The members of learning environments, strategic campus and property development, the Board of Directors who are employed within Akademiska Hus and overarching responsibility for investments. and the Government Offices do not receive any fee for this work. See the table on page 77 for information about remuneration. Common support functions • Payment to the President and other senior executives comprises A number of support functions with a variety of areas of expertise a basic salary and a pension. Payment to the President is decided provide support to management and the business in it day-to-day by the Board of Directors following a recommendation from the work. Human resources and corporate communications fall organi- Remuneration Committee. Remuneration to other senior execu- sationally under the President, while business, finance, legal affairs, tives is decided by the President following consultation with the purchasing, IT, valuation and analysis, risk management, controlling Remuneration Committee. Remuneration comprises a basic sal- and common services are subordinate to the Chief Financial Officer. ary and a defined contribution pension based on the ITP premiums In addition, a new support function was established, Innovation and according to a collective agreement. No variable or bonus-based Sustainable Development, to increase the Company’s innovation remuneration is paid. Salary surveys are conducted to make a and development capacity. Organisationally this function is subordi- comparison with other property companies. No changes will be nate to the President. made regarding the principles for remuneration to the Board of Directors and senior executives for 2018. CODE OF CONDUCT, ETHICAL COUNCIL AND WHISTLE-BLOWERS Akademiska Hus has a Code of Conduct that provides guidance on For a detailed description of remuneration, pensions, periods of how employees should act to live up to the Company’s positions notice, severance pay and fees to auditors, see the administration and values and provides guidance in potentially difficult situations. report on page 54 and Notes 10 and 11.

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Internal control of financial reporting

The responsibility of the Board of Directors for internal control is process used by Akademiska Hus. These controls have been designed governed by the Swedish Companies Act and the Code. This report to deal with the risk of significant errors that may arise in financial has been prepared in accordance with the Annual Accounts Act and reporting, and comprise both general and detailed checks. Control the Code and is thus limited to internal control of financial reporting. activities take place at several different levels in the Company and The purpose of internal control of financial reporting is to provide include approval of transactions, authorisation of supplier invoices reasonable assurance regarding the reliability of external financial and payments, account reconciliations and analytical follow-up. reporting in the form of interim reports and annual reports, and that All IT systems that are used for financial reporting include they are prepared in compliance with relevant laws, regulations, built-in automatic controls to ensure reliable financial reporting. accounting standards and the specific guidelines for external report- Control measures also take place in the general IT environment, in ing that apply to state-owned companies. the form of well-developed regulations that govern system permis- The description below is based on the five components that the sions, system updates and backup procedures. Committee of Sponsoring Organisations of the Treadway Commission (COSO) defined in its framework for internal management and control. INFORMATION AND COMMUNICATION Governing documents such as policies and accounting guidelines are CONTROL ENVIRONMENT available for all employees on the Company’s intranet. Special guide- The basis for internal control comprises the control environment lines and instructions relating to final account events are distributed with the organisation, decision procedures and responsibility. Each by the head of accounting and controller to all concerned employees year the Board of Directors adopts a number of policy documents through a shared files area. Internal information channels in general such as the Rules of Procedure for the Board of Directors, the Rules include information from regular meetings of Executive Management, of Procedure for the committees, instructions to the CEO, allocation Leader Forums held four times a year, local information meetings for of responsibility and authority, instructions for financial reporting, all staff and meetings in various forums for concerned specialist functions. plan for handling financial risks and financing policy describing the The Audit and Finance Committee receives regular updates from division of responsibilities and delegation of authority. The control both the internal auditor and external auditors and is thereby kept environment also encompasses the culture and the values based on up to date on current findings in internal management and control. which the Board of Directors and corporate management communi- The Audit Committee and the Board receive financial information cate and act, which is communicated in part via the Code of Conduct from Executive Management at each balance sheet date. that is adopted by the Board of Directors each year. External reporting complies with the State’s ownership policy The Board of Directors has overall responsibility for internal guidelines. control of financial reporting. The Board of Directors has established an Audit and Finance Committee which has tasks that include prepar- FOLLOW-UP AND EVALUATION ing the Board’s work with quality assurance of the Company’s finan- Internal management and control of financial reporting are monitored cial reporting. The responsibility of the Board of Directors and the and evaluated continuously by the Board of Directors, President, internal allocation of work within the Board and its committees are Executive Management and the accounting and finance department to clarified in the Rules of Procedure. ensure that procedures are appropriate and efficient. Opportunities for Akademiska Hus’ accounting and financial reporting is handled improvement are identified through controls and analyses. Any short- by a central unit. The Chief Financial Officer is responsible for comings in the system are reported to the relevant person to ensure ensuring that internal accounting policies and guidelines for financial that improvements can be made. On each balance sheet date, the Pres- reporting are in place and in compliance with current legal require- ident and Chief Financial Officer review the financials with the indi- ments, listing requirements and accounting standards. vidual responsible for each operational unit to monitor and discuss the financial performance and important business-related matters. RISK ASSESSMENT The overall financial results of the support functions are monitored. Risk assessments regarding financial reporting, which aim to identify Each quarter the Board receives financial information and an analy- and evaluate the business areas and processes where the greatest sis, as well as a report from the most recent meetings of the different risk of errors that could have a material impact on financial report- committees. The Audit and Finance Committee has a specific respon- ing can be found, are carried out on several levels in the Company. sibility to follow up audit matters and more extensive matters of prin- Executive Management identifies and evaluates ongoing risk areas ciple with regard to financial reporting where issues concerning prop- in order to ensure that reliable controls aimed at avoiding errors in erty valuation and the liability portfolio are particularly important. financial reporting are in place in the relevant processes. Risk analy- During the year the Board of Directors decided to discontinue sis and risks relating to financial reporting are regularly discussed the internal audit function. Instead, dedicated resources will be allo- with the external auditors, who also present their annual risk assess- cated with the task of strengthening the internal management and ment to the Audit Committee and the Board of Directors. control structure and procedures. Akademiska Hus continuously reviews and updates internal man- CONTROL ACTIVITIES agement and control procedures within the Company, for example, to Control activities that are designed to prevent, detect and correct take into account and implement measures regarding recommenda- errors and deviations are incorporated in the financial reporting tions from both the internal audit and the company’s external auditors.

AKADEMISKA HUS | ANNUAL REPORT 2017 54 ADMINISTRATION REPORT

Other information

REMUNERATION TO SENIOR EXECUTIVES Other senior executives within the Group have an agreed period Principles for remuneration to the Board of Directors and senior executives of notice of between six and twelve months depending on when the Akademiska Hus follows the owner’s guidelines governing terms and agreements were signed. Agreements entered into after 2009 follow conditions of employment for senior executives. Payment to the government guidelines with a period of notice of six months and in President and other senior executives comprises a basic salary and a the event of notice being given by the Company, severance pay is pension. Pension expenses refer to the cost charged to the profit for payable for a maximum of eighteen months. Agreements entered the year. Payment to the President is decided by the Board of Direc- into before 2009 stipulate a period of notice of twelve months and tors following a recommendation from the Remuneration Commit- severance pay for twelve months. All agreements, however, fall tee. Remuneration to other senior executives is decided by the Presi- within the framework of twenty-four months, including the period dent of the Parent Company following consultation with the Remu- of notice. Salary payable or remuneration for work performed during neration Committee. Remuneration comprises a basic salary and a the time severance pay is received shall be set off on a krona-by- defined contribution pension based on the ITP premiums according krona basis. to a collective agreement. No changes are proposed regarding the Other information about salaries and remuneration can be seen principles for remuneration to the Board of Directors and senior in Note 10 on pages 77–78. executives for 2018. A fee is paid to the members of the Board of Directors according PERMITS AND REPORTING REQUIREMENTS to a decision reached at the Annual General Meeting. Board members A number of facilities within the Group require a permit or need to who are employed in the Akademiska Hus Group, or who work at the be reported to a supervisory authority in order to be used. These Government Offices, do not receive any fee for this work. facilities have been reported and applications for permits (as required) Remuneration for committee work was set at the 2017 Annual were submitted to the supervisory authorities concerned and have General Meeting. been granted. The facilities in question are as follows: One facility for combustion technology research that requires a Pensions permit, and a number of facilities classified as subject to declaration Akademiska Hus has taken out an individual occupational pension with respect to energy production and sewer system. solution for the President, Kerstin Lindberg Göransson, where the agreed retirement age is 65 years. Akademiska Hus allocates 30 per SUSTAINABILITY REPORT cent of Kerstin Lindberg Göransson’s fixed monthly salary, which is In accordance with Chapter 6, section 11 of the Swedish Annual paid into an occupational pension insurance plan according to a Accounts Act, Akademiska Hus has chosen to prepare the statutory special agreement drawn up with a pension company. Sustainability Report as a separate report. The scope of the Sustain- The pension package includes a sickness and early retirement ability Report, which also includes Akademiska Hus’ sustainability pension, a retirement pension and optional survivor’s pension and/ report figures, is stated on page 102. or repayment cover. Other senior executives have similar defined contribution agree- EVENTS AFTER THE YEAR-END ments with a maximum allocation of 30 per cent of their salary, or There were no events of a material nature after the end of the what is termed a high-income earner solution with an opt-out pre- reporting period. mium that is costneutral compared with traditional, collectively agreed ITP. FUTURE DEVELOPMENTS Akademiska Hus has a project portfolio with approved and planned Periods of notice and severance pay investments of SEK 16.7 billion. The property portfolio is expected An agreement has been reached with the President, Kerstin Lindberg to increase in value by approximately SEK 9 billion over the next Göransson, regarding a mutual period of notice of six months. In the three years. Net operating income is expected to increase as new event of notice being given by the Company, severance pay is payable properties are completed, our streamlining initiatives make progress for a further eighteen months. The severance pay shall be considered and economies of scale are leveraged. The good cash flow limits the to include payment for holidays and pension benefits. The severance need for new financing to approximately SEK 3.5 billion for the pay is reduced by any amount Kerstin Lindberg Göransson may upcoming three-year period. Given the low interest rates, the inter- receive from other employment or through other activities. est coverage ratio is expected to remain strong.

AKADEMISKA HUS | ANNUAL REPORT 2017 ADMINISTRATION REPORT 55

Proposed allocation of unappropriated earnings According to the owner’s financial targets for Akademiska Hus, STATEMENT BY THE BOARD OF DIRECTORS PURSUANT which were adopted at the Annual General Meeting on 28 April 2014, TO SECTION 18, SUB-SECTION 4 OF THE COMPANIES ACT the dividend should amount to between 40 and 60 per cent of the The Board of Directors is of the opinion that the Company’s liquid- net profit after tax after reversal of changes in fair value and related ity can be maintained securely. On observance of the relationship deferred tax. When deciding on a dividend, consideration should be between the Company’s assets, liabilities and equity, and with due given to the Group’s capital structure and capital requirements consideration given to profit forecasts and investment requirements (equity ratio 30 to 40 per cent). The other economic objectives are as of this date, we believe that the proposed dividend is justifiable in that the return on operating capital should be at least 6.5 per cent the light of the demands that the nature, extent and risk of operations and the Group’s equity ratio should be 30 to 40 per cent. The average make on the level of equity. The proposed dividend is thus acceptable yield on operating capital over five years was 6.7 per cent whilst the in the light of the Company’s consolidation requirements, liquidity target was 6.5 per cent. Return on operating capital in 2017 was 5.9 and position in general. per cent. At the end of 2017, the equity ratio was 43.3 per cent for the The dividend does not affect the Company’s capacity to discharge Group and 19.0 per cent for the Parent Company. After the proposed its short-term and long-term obligations or to implement necessary dividend, the equity ratio will be 42.2 per cent for the Group and 16.5 investments. It is also the opinion of the Board of Directors that the per cent for the Parent Company. Company’s financial position, in the light of the proposed dividend, is secure for the creditors. Nor can the Board of Directors identify Available for allocation at the Annual General Meeting: any other circumstances that indicate that the dividend ought not Retained earnings SEK 959,880,931 to be paid in accordance with the proposal presented by the Board Profit for the year SEK 1,589,753,596 of Directors. The proposed value transfer can thus be justified in the Total SEK 2,549,634,527 light of what is stated in Section 17, sub-section 3, paragraphs 2–3 of the Companies Act. The Board of Directors and the President propose that the profit be allocated in such a way that SEK 1,630,000,000 is paid to the shareholder and SEK 919,634,527 is carried forward. For details of the financial results and the financial position in general, reference can be made to the following financial statements. The Annual General Meeting will be held on 27 April 2018 in Stockholm.

PROFIT USED AS A BASIS FOR CALCULATION OF DIVIDEND, SEK M Outcome consolidated Changes in value Profit used for results in the Group calculation of dividend Income from property management 5,806 — 5,806 Property management expenses –1,977 — –1,977 Net operating income 3,829 — 3,829 Central administration costs –67 — –67 Net interest income/expense –188 — –188 Profit before changes in value and taxes 3,574 — 3,574 Changes in value, properties 4,979 –4,979 — Change in value, financial instruments –242 189 –53 Profit/loss before appropriations and taxes 8,311 –4,790 3,521 Tax/current tax –1,858 1,054 –804 Profit after tax 6,453 –3,736 2,717 Dividend, 60% of the profit available for the payment of a dividend 1,630

The dividend as decided at the Annual General Meeting held on 28 April 2017 was SEK 1,393 million.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 56 Income Statements

Income Statements

Group Parent Company Amounts in KSEK 1,000 Note 2017 2016 2017 2016 INCOME FROM PROPERTY MANAGEMENT 4 Rental revenue 6 5,581,924 5,482,031 5,581,924 5,482,030 Other property management income 7 224,216 184,000 392,843 220,133 Total property management income 5,806,140 5,666,031 5,974,767 5,702,163

PROPERTY MANAGEMENT EXPENSES 4, 5 Operating costs 9 –784,660 –764,146 –782,694 –762,374 Maintenance costs –615,476 –686,339 –615,476 –686,339 Property administration 9 –308,900 –293,607 –289,456 –283,052 Other property management expenses 8 –268,073 –255,064 –271,077 –245,554 Total property management expenses –1,977,109 –1,999,156 –1,958,703 –1,977,319

NET OPERATING INCOME 3,829,031 3,666,875 4,016,064 3,724,844

Central administration costs 5 –66,809 –85,264 –66,809 –85,264 Net interest income/expense 12, 28 –188,464 –308,371 –289,632 –383,754 Depreciation and impairment as well as reversed impairment in property management 9 — — –1,159,924 –1,040,307

EARNINGS BEFORE CHANGES IN VALUE AND TAX 10, 11, 29 3,573,758 3,274,470 2,499,699 2,215,519

Changes in value, properties 16 4,979,366 3,682,200 — — Changes in value, financial instruments 12 –242,268 –241,038 –242,268 –241,038

PROFIT BEFORE APPROPRIATIONS AND TAXES 28, 29 8,310,856 6,714,402 2,257,431 1,974,481

Appropriations 13 — — –181,083 –174,672

PROFIT BEFORE TAX 8,310,856 6,714,402 2,076,348 1,799,809

Tax 14 –1,858,186 –1,566,375 –486,594 –485,164

PROFIT FOR THE YEAR 15 6,452,670 5,148,027 1,589,754 1,314,645

Of which attributable to the shareholder in the Parent Company 6,452,670 5,148,027

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Income Statements 57

Statement of profit or loss and other comprehensive income

Group Parent Company Amounts in KSEK 1,000 Note 2017 2016 2017 2016 PROFIT FOR THE YEAR 6,452,670 5,148,027 1,589,754 1,314,645

ITEMS THAT HAVE BEEN RECLASSIFIED OR CAN BE RECLASSIFIED TO PROFIT FOR THE YEAR Profit/loss from cash flow hedges 27 –4,332 51,819 –4,332 51,819 Tax attributable to cash flow hedges 14, 27 828 –11,566 828 –11,566 Cash flow hedges, net after tax, dissolved against profit or loss 27 726 754 726 754 ITEMS THAT CANNOT BE RECLASSIFIED TO PROFIT FOR THE YEAR Revaluation of defined benefit pensions 29 –28,665 –23,867 — — Tax attributable to defined benefit pensions 14 6,306 5,251 — — Total, other comprehensive income –25,137 22,391 –2,778 41,007

COMPREHENSIVE INCOME FOR THE YEAR 6,427,533 5,170,418 1,586,976 1,355,652

Of which attributable to the shareholder in the Parent Company 6,427,533 5,170,418

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 58 Income Statements

Comments on the Group’s performance

FULL-YEAR 2017 jects, since there were fewer such projects compared with 2016. Profit for the year was SEK 6,453 million, which is an improvement Operating costs increased by SEK 21 million to SEK 785 million, of SEK 1,305 million compared with the previous year. The main primarily due to increased costs for supervision and service related explanation is an increase in the fair value of the property holdings to the completion of new premises. Operating costs include media of almost SEK 5,000 million in 2017, to be compared with a corre- provision of SEK 521 million (519), equivalent to SEK 160/m² (161). sponding increase in value of SEK 3,700 million in 2016. In addition to the change in value, net operating income improved by SEK 162 ADMINISTRATION AND PROPERTY MANAGEMENT EXPENSES million and totalled SEK 3,829 million. Administration costs include costs for property management and central administration, which together are essentially unchanged. RENTAL REVENUE Property administration increased by SEK 15 million and totalled During the year rental revenue increased by SEK 100 million SEK 309 million, which is a combination of additions to the pur- compared with 2016 and totalled SEK 5,582 million (5,482). This chasing organisation related to LoU (the Swedish Public Procure- increase is mainly attributable to completion of new buildings in ment Act) and changes in accounting policies for projects. As a result Stockholm and Uppsala. The Royal College of Music, the Laboratory of accounting changes, a larger share of costs that were previously of the Future at Södertörn and part of the A house were commis- attributed to projects will now be expensed. Central administration sioned in Stockholm, and the Segerstedt Building and the Humani- decreased to SEK 67 million due to higher restructuring costs in ties Theatre were commissioned in Uppsala. 2016 in preparation for our new organisation, which became effec- Other property management income amounted to SEK 224 mil- tive on 1 January 2017, as well as lower consultant costs. lion (184). The increase relates to an additional consideration and Other property management expenses are unchanged compared a minor increase in revenue for tenant services. with the previous year.

LEASING LEVEL NET INTEREST INCOME AND EXPENSE The rentable area of the property portfolio at year-end was 3.3 million Net interest income and expense consists of interest on loans and square metres with a vacancy rate of 4.2 per cent (3.9). The financial net interest income related to the interest rate swap portfolio. The vacancy rate, measured in the rental value of vacant premises, is much cost of these items amounted to SEK 188 million (308) for the year, lower and totalled 1.0 per cent (0.9). The largest blocks of vacant corresponding to an interest rate of 0.94 per cent (1.30). Interest space remained unchanged during the year and can be found on the rates continue to be extremely low, which explains the lower cost of Ultuna Campus. They amounted to about 78,000 square metres, loans. As in 2016, the interest rate swap portfolio was restructured at including 30,000 square metres at Klinikcentrum (the Clinical the end of the year. In order to allocate interest rate risk to effective Centre). The occupancy rate is high compared with the sector at periods, interest rate swaps with short remaining maturity were large, since leases are always signed before new projects can begin. replaced by interest rate swaps with future starts, where protection against rising interest rates is deemed more cost effective given OPERATING AND MAINTENANCE COSTS current market conditions. This has resulted in lower net interest Expenses for operation and maintenance amounted to SEK 1,400 income/expense from the interest rate swap portfolio. Capitalised million (1,450). interest expense for projects in progress, which was not included in net Total maintenance costs amounted to SEK 615 million (686). The interest and income expense, totalled SEK 101 million (75) at year-end. maintenance costs that declined are mainly related to major pro-

STABLE RENTAL REVENUE RISING NET OPERATING INCOME IMPROVED INTEREST COVERAGE RATIO

SEK m SEK m%% 6,000 4,000 80 1,000

5,000 800 3,000 60 4,000 600 3,000 2,000 40 400 2,000 1,000 20 1,000 200 0 0 0 0 13 14 15 16 17 Year 13 14 15 16 17 Year 13 14 15 16 17 Year

Net operating income, SEK m Net operating income ratio, %

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Income Statements 59

CHANGES IN VALUE, PROPERTIES denominated in foreign currency for the purpose of eliminating The fair value of the Group’s property holdings was set using an currency risk exposure. This approach creates financing in SEK at a internal property valuation. The change in value with an impact on fixed credit margin over the entire maturity. The changes in value in profit for the year was SEK 4,979 million (3,682), including changes in fair value hedges are an accounting method to express ineffectiveness value realised of SEK 0 million (35). The change in value corresponds and have no impact on future cash flows. with an increase of 6.8 per cent (5.5) of the total property value. The largest part of the increase, 68.2 per cent (66.8), relates to COMPARATIVE CALCULATION, TOTAL FINANCING COST the lower yield requirement on several of the sub-markets. The aver- Over the past five years Akademiska Hus has had a relatively long age yield requirement was 5.25 per cent (5.55). The remaining change fixed interest period in the total liability portfolio. The performance in value is attributable to projects in progress, renegotiated leases analysis is significantly complicated by the substantial use of inter- and other factors affecting value. The largest increase in value was est derivatives, which generate changes in value with interest rate noted in the Stockholm Region, which has a larger proportion of fluctuations in the market. The changes in value consist of a present project properties, but where the yield requirements also fell com- value for both realised and unrealised interest rate derivatives. pared with smaller sub-markets. A certain proportion of interest rate derivatives is realised on an ongoing basis (monthly or quarterly), even if the maturity of the CHANGES IN VALUE, FINANCIAL INSTRUMENTS underlying instrument is long-term. Changes in value in the derivative portfolio amounted to SEK –242 To clarify the underlying financing cost, a comparative calcula- million (–241). The derivative portfolio primarily consists of interest tion is carried out in which the cash flows of realised interest rate rate swaps that are mainly entered into with the aim of extending derivatives are also attributed to the underlying maturity of each the fixed interest period in the liability portfolio, where 60 per cent instrument. This period allocation of earnings from closed interest of financing currently relies on variable interest rates. One third of rate derivatives amounted to SEK –156 million for 2017. The dia- the Group’s interest risk exposure derives from interest rate swaps, gram below on the right shows this comparative calculation in for which reason even minor changes in the interest rate situation which interest rates are expressed as rolling 12-month interest rate affects earnings through changes in fair value. Falling market inter- (annualised). The accrued financing cost amounted to 1.50 per cent est rates entail a negative impact on profit and the opposite is true for 2017. The calculation confirms that the long fixed interest period when interest rates rise. Thus, in a fixed income market with large has resulted in relatively stable financing costs over time. fluctuations in interest rates, the changes in value will be significant. The interest coverage ratio continues to be high at 871 per cent Cross currency interest-rate swaps are included in bond financing (694), see diagram on page 58. When calculating the interest coverage ratio, the capitalised interest expense and accrued earnings from the closed interest rate derivatives are reversed.

TOTAL FINANCING COST INCLUDING CHANGES IN VALUE 01-01-2017– 01-01-2016– COMMENTS ON THE PARENT COMPANY’S PERFORMANCE 31-12-2017 31-12-2016 The Company’s revenue for the year totalled SEK 5,975 million Interest cost for loans, including charges, % 0.74 0.83 (5,702). Of this amount, revenue from subsidiaries accounted for Interest swaps, net interest, % 0.20 0.47 SEK 0 million (0). The profit before change in value and tax was SEK Net interest income and expense, % 0.94 1.30 2,500 million (2,216) and net financial income/expense was SEK Changes in value, financial derivatives, % 0.85 0.85 –532 million (–625). Profit after tax was SEK 1,590 million (1,315). Total financing cost, % 1.79 2.15

TOTAL FINANCING COST BROKEN DOWN IN SEK MILLION COMPARISONS, DIFFERENT CALCULATIONS OF FINANCING COST, % 01-01-2017– 01-01-2016– 31-12-2017 31-12-2016 6 Interest cost, net loans and financial assets –221 –233 5 Net interest derivatives –60 –133 4 Change in value, independent 3 financial derivatives – unrealised –8 –18 2 1.79 1.50 – realised –54 –217 1 Changes in value, fair value hedges –181 –6 0 07 08 09 10 11 12 13 14 15 16 17 Year Other interest costs –8 –17 Capitalised interest expense, projects 101 75 Period-allocated financing cost, rolling 12-month basis, % Reported net interest income and Financing cost according to IFRS rolling 12-month basis, % expense –431 –549

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 60 Balance Sheets

Balance Sheets

Group Parent Company Amounts in KSEK 1,000 Note 31-12-2017 31-12-2016 31-12-2017 31-12-2016 ASSETS NON-CURRENT ASSETS Properties 16, 17 80,444,370 73,012,860 42,951,358 41,590,753 Equipment, fixtures and fittings 18 8,117 11,104 8,117 11,104 Shares in Group companies 19 — — 650 650 Derivatives 20, 25, 33 1,053,358 2,172,381 1,053,358 2,172,381 Other non-current receivables 21.25 208,931 223,516 208,931 223,516

TOTAL NON-CURRENT ASSETS 25 81,714,777 75,419,861 44,222,415 43,998,404

CURRENT ASSETS Current receivables Rent receivables and accounts receivable 22 316,423 317,130 316,423 317,130 Current prepaid tax 14 — 15,267 — 15,267 Other receivables 23 1,320,431 1,015,831 1,320,430 1,015,830 Prepaid expenses and accrued income 24 128,373 77,624 128,373 77,624 Derivatives 20, 33 597,755 214,551 597,755 214,551 Total current receivables 25 2,362,982 1,640,403 2,362,981 1,640,402

CASH AND CASH EQUIVALENTS/CASH AND BANK BALANCES Current investments 33 5,480,660 4,823,977 5,480,660 4,823,977 Cash and bank balances 998,824 545,640 998,678 545,492 Total cash and cash equivalents/cash and bank balances 26 6,479,484 5,369,617 6,479,338 5,369,469

TOTAL CURRENT ASSETS 8,842,466 7,010,020 8,842,319 7,009,871

TOTAL ASSETS 90,557,243 82,429,881 53,064,734 51,008,275

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Balance Sheets 61

Balance Sheets

Group Parent Company Amounts in KSEK 1,000 Note 31-12-2017 31-12-2016 31-12-2017 31-12-2016 EQUITY AND LIABILITIES EQUITY (attributable to the Parent Company’s shareholder) Share capital 2,135,000 2,135,000 2,135,000 2,135,000 Other contributed equity 2,134,950 2,134,950 — — Statutory reserve — — 2,134,950 2,134,950

Hedge reserve 27 6,814 9,592 — — Actuarial profit and loss –946 21,413 — — Fair value reserve 27 — — 6,814 9,592 Retained earnings, including profit for the year 34,910,394 29,850,722 — — Retained earnings (in the Parent Company) — — 953,067 1,031,422 Profit for the year (in the Parent Company) — — 1,589,754 1,314,645 TOTAL EQUITY 39,186,212 34,151,677 6,819,585 6,625,609

Untaxed reserves 13 — — 4,206,207 4,025,123

LIABILITIES Non-current liabilities Loans 28 25,198,340 22,805,209 25,198,340 22,805,209 Derivatives 20, 33 935,468 632,093 935,468 632,093 Deferred tax liability 14 11,443,540 9,981,816 2,315,151 2,218,713 Other liabilities 30 74,555 110,717 74,555 110,716 Provisions for pensions and similar obligations 29 496,522 442,794 290,069 282,484 Total non-current liabilities 38,148,425 33,972,629 28,813,583 26,049,215

Current liabilities Accounts payable 492,159 213,144 492,159 213,144 Liabilities to Group companies — — 2,153 2,152 Income tax liabilities 14 27,6 49 — 27,649 — Other liabilities 30 1,142,818 2,061,217 1,143,418 2,061,818 Accrued expenses and prepaid income 31 1,950,146 2,021,527 1,950,146 2,021,527 Loans 28 9,541,313 9,951,354 9,541,313 9,951,354 Derivatives 20, 33 68,521 58,333 68,521 58,333 Total current liabilities 13,222,607 14,305,575 13,225,360 14,308,328

TOTAL LIABILITIES 32 51,371,031 48,278,204 42,038,943 40,357,543

TOTAL EQUITY AND LIABILITIES 90,557,243 82,429,881 53,064,734 51,008,275

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 62 Balance Sheets

Comments on the Group’s balance sheet

PROPERTIES for community properties is reflected in the valuation by the reduc- As at 31 December 2017 the fair value of Akademiska Hus’ property tions in yield requirement and cost of capital. The average yield holdings totalled SEK 80,444 million, an increase of SEK 7,432 mil- requirement was 5.25 per cent, a decline of about 0.3 percentage lion corresponding to 10.2 per cent compared with 31 December points since 31 December. 2016. Fair value includes the completed portion of projects in pro- Akademiska Hus engages an external rating agency to verify the gress, for a total of SEK 5,717 million. The change in value with an yield requirement and fixed costs on a quarterly basis to ensure that impact on profit and capitalised interest expense was SEK 4,979 mil- market rates are applied in the internal valuation. About 25 to 30 per lion (3,682), including changes in value realised for properties sold cent of property holdings are valued externally each year. External during the year of SEK 0 million (35). The remaining change relates valuations are used as a benchmark for the internal valuation, to net investments. thereby strengthening its reliability. The fair value was calculated by means of an internal property All property valuation includes assessments that are associated valuation covering all the Company’s properties. The value is with a certain degree of uncertainty. A normal uncertainty range in affected by property-specific conditions such as net operating conjunction with a property valuation is +/– five to ten per cent, income, rent levels, vacancy levels, lease term and type of premises. which would be equivalent to approximately SEK +/– 4,000 – 8,000 The general increase in prices on the property market and demand million in the Akademiska Hus portfolio.

PROPERTIES SENSITIVITY ANALYSIS (incl. new construction in progress and capitalised interest expense) Change in cost of capital and yield targets in 2018 Change in property holdings, SEK m 31-12-2017 31-12-2016 Increase by one Decrease by one Opening fair value 73,013 66,575 Outcome 2017 percentage point percentage point + Investment in new construction Fair value, SEK m 4,979 –11,535 15,454 and redevelopment 2,656 2,836 Return on equity, + Acquisitions — — per cent 17.6 –17.5 32.3 – Sales –204 –46 Return on operating +/– Change in fair value 4,979 3,647 capital, per cent 5.9 6.1 5.2 Of which change in value due to a change Equity ratio, per cent 43.3 38.9 48.6 in the cost of capital and yield requirement 3,395 2,435 Loan-to-value ratio, Of which other change in value 1,585 1,212 per cent 34.3 39.8 29.0 Closing fair value 80,444 73,013

YIELD REQUIREMENTS AND COST OF CAPITAL, % PROPERTY PORTFOLIO’S ACCUMULATED VALUE GROWTH AND NUMBER OF SQUARE METRES FLOOR SPACE, M²

SEK m Thousand m² 9 100,000 3,400

8 80,000 3,300 7 60,000 3,200 40,000 6 20,000 3,100 5 0 4 –10,000 3,000 11 12 13 14 15 16 17 Year 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Floor space, m² Other acquisitions Average cost of capital, % Other change in value Acquisitions from the Swedish state Average yield requirement, % Construction Sales

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Balance Sheets 63

FINANCING FIXED INTEREST PERIOD AND MATURITY The net liability portfolio increased by SEK 607 million during the The extensive long-term bonds and the loan from the Nordic Invest- year and totalled SEK 27,569 million at year-end. The equity ratio ment Bank have made it possible to reduce short-term financing and was 43.3 per cent (41.4). Tighter credit spreads combined with also serve as pre-funding of bonds maturing in 2018. They have a strong interest in Akademiska Hus’ bonds with extremely long therefore helped to extend the average maturity in the liability port- maturities from foreign investors have made extensive issuances folio by just over two years. Stricter requirements for banks’ capital possible. Consequently, it has been possible to meet the request adequacy is costly and justifies the continued focus on bond financ- for further diversification of the liability portfolio. During the year, ing. During the year Akademiska Hus maintained good surplus 16 bond issues were carried out for a total of SEK 7,100 million, with liquidity and as of year-end it was SEK 6,479 million. foreign investors accounting for SEK 5,600 million of this amount. Long-term bonds denominated in SEK at fixed interest, which Of these, SEK 4,500 million related to bonds denominated in foreign added SEK 1,175 to the long-term portfolio during the year, helped currencies represented by AUD, USD, EUR and CHF. Maturities to maintain a relatively long fixed interest period in the total port have varied between 2.5 and 30 years, with an emphasis on the folio of about 7.6 years. longer segment as shown in the table below. The average maturity of issuances for the year was just over 15 years.

NET LOAN LIABILITY FIXED INTEREST PERIOD AND MATURITY SEK m 31-12-2017 31-12-2016 Fixed interest Maturity Loans –34,740 –32,757 SEK m 31-12-2017 31-12-2016 31-12-2017 31-12-2016 Derivatives – liabilities –958 –690 Basic portfolio 22,900 4.5 4.7 4.5 2.3 Collateral for derivatives –858 –1,762 Non-current portfolio 4,800 23.0 23.7 23.0 23.7 Cash and cash equivalents 6,479 5,369 Index-linked Other current receivables 857 492 bond portfolio 900 4.8 5.8 4.8 5.8 Derivatives – receivables 1,651 2,386 Total portfolio 7.6 7.2 7.6 5.2 Total net loan liability –27,569 –26,962

BOND ISSUES AND LONG-TERM FINANCING Volume broken down by maturity interval Maturity, year Volume, SEK million 0–5 1,000 6–10 650 11–15 3,900 16–20 650 21–25 1,000 26–30 900 Total 8,100

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 64 Changes in Equity, Group

Changes in Equity, Group

Attributable to the Parent Company’s shareholder Other Actuarial Profit for the contributed Hedge profit year brought Amounts in KSEK 1,000 Note Share capital capital reserve and loss forward Total equity OPENING BALANCE AS AT 1 JANUARY 2016 2,135,000 2,134,950 –31,415 40,029 25,992,695 30,271,259 Comprehensive income Profit for the year — — — — 5,148,027 5,148,027 Other comprehensive income Profit/loss from cash flow hedges 26 — — 41,007 — — 41,007 Revaluation of defined benefit pensions — — — –18,616 — –18,616 Total, other comprehensive income — — 41,007 –18,616 5,148,027 5,170,418

Transactions with shareholder Dividend1 — — — — –1,290,000 –1,290,000 Total transactions with shareholder — — — — –1,290,000 –1,290,000

CLOSING BALANCE AS AT 31 DECEMBER 2016 2,135,000 2,134,950 9,592 21,413 29,850,722 34,151,677

Comprehensive income Profit for the year — — — — 6,452,671 6,452,671 Other comprehensive income Profit/loss from cash flow hedges 26 — — –2,778 — — –2,778 Revaluation of defined benefit pensions — — — –22,359 — –22,359 Total, other comprehensive income — — –2,778 –22,359 6,452,671 6,427,53 4

Transactions with shareholder Dividends2 — — — — –1,393,000 –1,393,000 Total transactions with shareholder — — — — –1,393,000 –1,393,000 CLOSING BALANCE AS AT 31 DECEMBER 2017 2,135,000 2,134,950 6,814 –946 34,910,394 39,186,212

1) Dividend of SEK 1,290,000,000 was authorised by the Annual General Meeting on 28 April 2016. 2) Dividend of SEK 1,393,000,000 was authorised by the Annual General Meeting on 28 April 2017.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Changes in Equity, Parent Company 65

Changes in Equity, Parent Company

Restricted equity Non-restricted equity Profit for the Statutory Fair value year brought Amounts in KSEK 1,000 Note Share capital reserve reserve forward Total equity OPENING BALANCE AS AT 1 JANUARY 2016 2,135,000 2,134,950 –31,415 2,321,422 6,559,957 Comprehensive income Profit for the year — — — 1,314,645 1,314,645 Other comprehensive income Profit/loss from cash flow hedges 26 — — 41,007 — 41,007 Total, other comprehensive income — — 41,007 1,314,645 1,355,652

Transactions with shareholder Dividend1 — — — –1,290,000 –1,290,000 Total transactions with shareholder — — — –1,290,000 –1,290,000

CLOSING BALANCE AS AT 31 DECEMBER 2016 2,135,000 2,134,950 9,592 2,346,067 6,625,609

Comprehensive income Profit for the year — — — 1,589,754 1,589,754 Other comprehensive income Profit/loss from cash flow hedges 26 — — –2,778 — –2,778 Total, other comprehensive income — — –2,778 1,589,754 1,586,976

Transactions with shareholder Dividends2 — — — –1,393,000 –1,393,000 Total transactions with shareholder — — — –1,393,000 –1,393,000

CLOSING BALANCE AS AT 31 DECEMBER 2017 2,135,000 2,134,950 6,814 2,542,821 6,819,585

1) Dividend of SEK 1,290,000,000 was authorised by the Annual General Meeting on 28 April 2016. 2) Dividend of SEK 1,393,000,000 was authorised by the Annual General Meeting on 28 April 2017.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 66 Statements of Cash Flows

Statements of Cash Flows

Group Parent Company Amounts in KSEK 1,000 Note 2017 2016 2017 2016 CURRENT OPERATIONS Profit after financial items 37 8,310,856 6,714,402 2,257,431 1,974,481 Adjustment for items not included in the cash flow 38 –4,742,203 –4,106,076 1,308,219 655,639 Tax paid –346,456 –334,816 –346,456 –334,816 CASH FLOW FROM CURRENT OPERATIONS BEFORE CHANGES IN WORKING CAPITAL 3,222,197 2,273,510 3,219,194 2,295,304

CASH FLOW FROM CHANGES IN WORKING CAPITAL Increase (–)/Decrease (+) in current receivables –354,389 –156,078 –354,641 –156,078 Increase (+)/Decrease (–) in current liabilities –747,136 603,069 –743,879 581,275 CASH FLOW FROM CURRENT OPERATIONS 2,120,672 2,720,501 2,120,674 2,720,501

INVESTING ACTIVITIES 39 Investment in properties –2,554,723 –2,761,150 –2,554,723 –2,761,150 Sale of properties 203,750 103,072 203,750 103,072 Investment in other non-current assets –944 –2,457 –944 –2,457 Decrease in non-current receivables 11,221 112,275 11,221 112,275 CASH FLOW FROM INVESTING ACTIVITIES –2,340,696 –2,548,260 –2,340,696 –2,548,260

FINANCING ACTIVITIES Raising of interest-bearing loans, excluding refinancing 40 2,722,891 4,182,791 2,722,891 4,182,791 Dividend paid –1,393,000 –3,290,000 –1,393,000 –3,290,000 CASH FLOW FROM FINANCING ACTIVITIES 1,329,891 892,791 1,329,891 892,791

CASH FLOW FOR THE YEAR 1,109,867 1,065,032 1,109,869 1,065,032

Cash and cash equivalents at the beginning of the year 5,369,617 4,304,585 5,369,468 4,304,436 Closing cash and cash equivalents 25 6,479,484 5,369,617 6,479,338 5,369,468

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Statements of Cash Flows 67

Comments on the consolidated statement of cash flows

Cash flow from current operations before changes in working capital totalled SEK 3,222 million (2,274). The impact of investment in STABLE CASH FLOW FROM CURRENT OPERATIONS, SEK m properties on cash flow was SEK 2,555 million (2,761). Cash Flow relating to financing activities amounted to SEK 1,330 3,500 million (893). New loans were taken out to pay for an extra distribu- 3,000 tion to the owner in April 2016. In May 2017 a dividend of SEK 1,393 2,500 million was paid to the owner. 2,000 Total cash flow for the year amounted to SEK 1,110 million (1,065). 1,500 1,000 CASH FLOW AND INVESTMENTS 500 0 Total cash flow from current operations before change in working 13 14 15 16 17 Year capital during the period 2013 to 2017 was SEK 14,144 million. Investments during the same period totalled SEK 13,589 million. Cash flow from current operations before changes in working capital Investments The table shows that cash flow from current operations is reinvested in its entirety in new construction as well as in redevelopment and extensions of existing holdings.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 68 SubSection

Note 1 General information 69 Note 2 General accounting policies 69 Note 3 Estimates and assessments 73 Note 4 Segment reporting 74 Note 5 Categorised operating costs 75 Note 6 Rental revenue 76 Note 7 Other property management income 76 Note 8 Other property management expenses 76 Note 9 Depreciation, impairments and reversed 76 impairments in property management Note 10 Employees and personnel costs 77 Note 11 Fees and disbursements to auditors out of 78 pocket expenses Note 12 Financial income and expense 79 Note 13 Appropriations and untaxed reserves 79 (Parent Company) Note 14 Tax 80 Note 15 Dividend 81 Note 16 Properties (Group) 82 Note 17 Properties (Parent Company) 84 Note 18 Equipment, fixtures and fittings 84 Note 19 Shares in Group companies 85 Note 20 Derivatives (Group) 85 Note 21 Other non-current receivables 86 Note 22 Rent receivables and accounts receivable 86 Note 23 Other receivables 86 Note 24 Prepaid expenses and accrued income 86 Note 25 Maturity structure, receivables 86 Note 26 Cash and cash equivalents/Cash and bank balances 87 Note 27 Hedge reserve/Fair value reserve 87 Note 28 Loans 87 Note 29 Provisions for pensions 89 Note 30 Other liabilities 90 Note 31 Accrued expenses and prepaid income 91 Note 32 Maturity structure, liabilities 91 Note 33 Financial instruments valued at fair value 91 Note 34 Financial risk management (Group) 92 Note 35 Asset management (Group) 94 Note 36 Pledged assets 94 Note 37 Contingent liabilities 94 Note 38 Adjustments for items not included in cash flow 94 Note 39 Purchase sum in conjunction with investments, 94 acquisitions and disposals Note 40 Reconciliation of liabilities attributable 94 to financing activities Note 41 Change in interest-bearing net loan liabilities 95 Note 42 Transactions with related parties 95 Note 43 Events after the year-end 95

AKADEMISKA HUS | ANNUAL REPORT 2017 School of Architecture, KTH, Stockholm FINANCIAL STATEMENTS Notes 69

1 Notes 2 Amounts are in SEK 1,000 unless stated otherwise. 3 4

7 1 financial assets measured at amortised cost or at fair value through General information other comprehensive income. This loss reserve will not be material to 8 the Group or the parent company. Akademiska Hus AB (publ), registration number 556459-9156, is a 9 limited liability company registered in Sweden. The Company’s regis- IFRS 15 Revenue from contracts with customers provides a single 10 tered office is in Gothenburg. Akademiska Hus is wholly owned by the model for revenue recognition regarding customer contracts not cov- Swedish state. ered by other standards. A study conducted in 2017 showed that the 11 consequences of IFRS 15 will not have any material effect on the The Company is the Parent Company in the Akademiska Hus 12 Group, the principal task of which is to own and manage university and Group’s net sales either with regards to the amount recognised as college properties. Essentially the entire Group’s operations are con- revenues or the timing of when revenues are recognised. The Group’s 13 revenue primarily consists of rental revenue that is recognised under ducted in the Parent Company, 14 The Parent Company’s functional currency is SEK. All amounts are IAS 17 Leasing, which will be replaced on 1 January 2019 by IFRS 16 15 in SEK 1,000 unless stated otherwise. Leasing. Only a small portion of the Group’s revenues are subject to IFRS 15. These revenues include charges for additional services such 16 as electricity, heat, water, cooling, ventilation, etc. These items are con- 17 2 General accounting policies sidered to be integrated components of the lease. Our tenants have no influence on the choice of provider, frequency or execution of these 18 services. The amounts involved are not significant for Akademiska Hus The consolidated accounts have been prepared in accordance with the 19 EU-endorsed International Financial Reporting Standards (IFRS) as and will be recognised in the income statement as rental revenue. at 31 December 2017. The Group also applies Swedish Financial Report- IFRS 16 Leasing was adopted by the EU in 2017 and shall apply to 20 financial years starting on or after 1 January 2019. The standard will ing Board recommendation RFR 1, Supplementary Rules for Consoli- 21 dated Financial Statements, which specifies the supplements to IFRS affect recognition of the Group’s operating leases where the Group is 22 disclosures required pursuant to the rules in the Annual Accounts Act. the lessee. For this type of lease, the future value is calculated and In the Annual Report, items have been valued at cost except with entered in the balance sheet. The Group has a few such leases, for which 23 reason the assessment is that the standard will not have any significant regard to revaluation of properties, financial assets that can be sold and 24 financial assets and liabilities (including derivatives) valued at fair effect on the Group’s financial reporting, other than leasehold agree- value in the Statement of Financial Position. ments that might increase the balance sheet total and net operating 25 income. The accounting policies are unchanged compared with the most 26 recent annual report, with the exception of changes in headings in the income statement and segment reporting. Profit through net operating CONSOLIDATED ACCOUNTS 27 The consolidated accounts cover the Parent Company and companies income is unchanged. Reporting was adapted to conform with current 28 industry practice by reporting changes in the value of properties and over which the Parent Company has a controlling influence. A con- 29 financial instruments under separate headings. The comparative fig- trolling influence means a right to formulate strategies for financial ures are restated. activities with the aim of securing financial advantages. The existence 30 and effect of potential voting rights that can currently be exercised or 31 NEW AND AMENDED IFRS STANDARDS converted are taken into account when assessing whether the Group AND INTERPRETATIONS 2017 can exercise a controlling influence over another company. All subsidi- 32 aries are wholly owned. The subsidiaries are included in the consoli- No new or amended IFRSs that have a material impact on Akademiska 33 Hus’ reporting have entered into force in 2017. dated accounts with effect from the point at which the controlling influence is achieved and they are not included at the point at which 34 NEW AND AMENDED STANDARDS AND INTERPRETATIONS the controlling influence ceases. 35 The consolidated year-end accounts have been prepared according THAT COME INTO EFFECT 2018 AND LATER 36 As of 1 January 2018, the Akademiska Hus Group applies IFRS 9 Finan- to the acquisition method, which means that the Parent Company’s cial Instruments and IFRS 15 Revenue from contracts with customers. carrying amount of shares in subsidiaries is eliminated against equity, 37 including the capital share of untaxed reserves in the subsidiaries. They have not been applied in preparing these financial statements. 38 The analysis of the effects of implementing IFRS 9 Financial Instru- ments and IFRS 15 Revenue from contracts with customers has been SEGMENT REPORTING 39 Operating segments are reported in a way that concurs with the inter- concluded. 40 IFRS 9 Financial instruments provides a model for the classifica- nal report presented to the highest-ranking executive decision-maker. 41 tion and measurement of financial instruments, a forward-looking The highest-ranking executive decision-maker is the function that is impairment model for financial assets and a significantly revised responsible for allocating resources and assessing the results of operat- 42 ing segments. At Akademiska Hus, this function has been identified as approach to hedge accounting. Classification and measurement under 43 IFRS 9 are based on the business model a company applies for manage- the President of the Parent Company. ment of financial assets and the characteristics of the contractual cash The Group is organised and controlled based on a geographical flows of the financial asset. Other than some changes in terminology, division into markets/administration areas. The geographical areas the amendment has no impact on measurement of Akademiska Hus’ (segments) are exposed to similar risks and opportunities. financial instruments. Derivatives will continue to be carried at fair Segments are consolidated according to the same accounting poli- value through profit or loss. Akademiska Hus applies hedge accounting cies as for the Group as a whole. and will continue to do so under IFRS 9 and estimates that the hedge is effective even under the new standard. Consequently, the transition to REVENUE RECOGNITION IFRS 9 will have no effect on operations. No restatement of compara- In its capacity as property owner, the Group has signed operational tive figures will take place. A loss provision will be recognised for all lease agreements with customers and consequently the Group’s

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 70 Notes

1 reported income mainly comprises rental revenue. Where applicable, The defined benefit pension obligations reported in the Statement of reported rental revenue has been reduced by the sum of the discounts Financial Position are equivalent to the current surplus or deficit 2 granted to tenants. In those cases where lease agreements result in related to the Group’s defined benefit obligations. A surplus is only 3 reduced rent during a certain period, which is equivalent to a higher reported to the extent that it is equivalent to the current value of future rent during another (later) period, this higher or lower rent is allocated repayments from each pension plan or future reductions in premium 4 to a specific period over the term of the lease. Rental revenue, lease payments into the plan. 5 revenue and parking revenue are reported in advance and the allocation of rents to specific periods therefore takes place so that only part TAX 6 of the rents that accrue to the period are reported as revenue. Revenue The tax expense (– income) for the period comprises current and 7 recognition normally takes place linearly over the term of the lease deferred tax. Taxes are reported in the Statement of Comprehensive 8 agreement apart from exceptional cases when another method better Income with the exception of the underlying transaction, which is reflects how financial advantages accrue to the Group. reported under Other comprehensive income or directly against equity, 9 Other property management income is reported, where applicable, whereupon the associated tax effect is reported under Other compre- 10 in the same way as rental revenue. This post largely comprises revenues hensive income or against equity. as a direct result of the leases and mainly consists of revenues from Current tax is the tax computed on the taxable profit for a period. 11 parking, services for tenants and other management tasks. The taxable profit for the year differs from the reported profit for the 12 Interest income is reported as income divided across the term on year in the fact that an adjustment has been made for non-taxable and 13 application of the annual equivalent rate method. non-deductible items. The Group’s current tax liability is computed Dividend income is reported when the right to receive payment has according to the tax rates stipulated or notified as of the year-end. 14 been confirmed. Deferred tax is reported in accordance with the Statement of Finan- 15 cial Position method. According to this method, deferred tax liabilities REMUNERATION TO EMPLOYEES are reported in the Statement of Financial Position for all taxable tem- 16 Remuneration to employees in the form of salary, paid holiday, payment porary differences between the carrying amounts and taxable values of 17 while off sick etc., as well as pensions, are reported as they are earned. assets and liabilities. Deferred tax assets are reported in the Statement As regards pensions and other remuneration following termination of of Financial Position with regard to deficit deductions and all deductible 18 employment, these are classified as defined contribution pension plans temporary differences to the extent it is likely that the amounts can be 19 or defined benefit pension plans. offset against future taxable surpluses. The reported value of deferred 20 tax assets is examined at each year-end and reduced to the extent it is Defined contribution plans no longer probable that a sufficient taxable surplus will be available for 21 In the case of defined contribution plans, the Company pays fixed con- utilisation. 22 tributions to a separate, independent legal entity and has no obligation Deferred tax is computed using the tax rates that are expected to to make further contributions. The Group’s profit is charged with costs apply for the period in which the asset is recovered or the liability settled. 23 as the benefits are earned, which normally concurs with the point at Tax receivables and tax liabilities are offset and reported at a net 24 which premiums are paid. Commencing on 1 November 2017 the Group amount in the Statement of Financial Position when there is a legal pays flex pension to employees who are over the age of 25 and under the 25 right to offset and when there is an intention to either receive or pay age of 65 years. The premium corresponds with 0.2 per cent of pensionable a net amount or receive payment of a receivable and pay the liability 26 salary in 2017 and has been raised to 0.4 per cent for contract year 2018. at the same time. 27 Defined benefit plans TRANSLATION OF ITEMS IN FOREIGN CURRENCY 28 For defined benefit pension plans, the cost of the pension plan is based Financial assets and liabilities in foreign currency are translated at the 29 on actuarial calculations according to what is termed the Projected year-end rate, whereupon realised and unrealised translation differ- Unit Credit Method. A calculation is made each year by an independent ences are capitalised. Translation differences in operating receivables 30 actuary. Revaluations, including actuarial gains and losses, effects of and liabilities are reported under Other property management income 31 changes in the asset ceiling and the yield on plan assets (excluding the or Other property management expense whilst translation differences 32 interest component, which is reported in the Statement of Comprehen- attributable to financial assets and liabilities are reported under Net sive Income) are reported directly in the Statement of Financial Position interest income. 33 as income or a cost equivalent to the change in the Statement of Total 34 Comprehensive Income during the period in which they arise. Revalua- PROPERTIES tions, which are reported under Other comprehensive income, affect Properties, i.e. properties that are held to generate rental revenue or 35 the retained earnings and will not be reversed to profit or loss. Service gains from an increase in value, are valued continuously at fair value 36 costs from previous periods are reported in the Statement of Compre- (assessed market value). The fair value is based on the assessed market hensive Income for the period in which the plan was changed. Net value at the year-end, which means the value at which a property could 37 interest is calculated on application of the discount rate at the begin- be transferred between knowledgeable parties who are independent 38 ning of the period on the net defined benefit liability or asset. of each other and who have an interest in the transaction being 39 The discount rate is the interest rate at the year-end on high-quality implemented. Changes in fair value are reported in the Statement of mortgage bonds with a maturity corresponding to the Group’s pension Comprehensive Income under the heading Changes in value of the 40 obligations. When there is not a functioning market for such mortgage properties. 41 bonds, the market for government bonds with similar maturity is used The term ‘properties’ includes buildings and land, land systems, instead. building and land equipment as well as properties under construction 42 The defined benefit costs are divided into the following categories: (new construction in progress). 43 • Service costs (including service costs for the current period, service Property sales and property purchases are reported in conjunction costs for previous periods and profits and losses in respect of reduc- with the risks and benefits linked to title being transferred to the pur- tions and/or adjustments) chaser or seller, which normally takes place on the completion date, • Net interest cost or net interest expense as long as this does not conflict with the terms and conditions in the • Actuarial gains and losses contract of sale. For property sales through companies, the sale is reported at the date of taking possession. The first two categories are reported in the Statement of Comprehen- A profit or loss that arises on the sale or disposal of properties sive Income as a personnel cost (service cost) or net interest income comprises the difference between the sales price and the most recent and expense (net interest expense). Profits and losses in respect of valuation (reported value based on the most recent revaluation at fair reductions and adjustments are reported as service costs from previous value). The result in conjunction with sale or disposal is reported in the periods. Revaluations are reported under Other comprehensive income. Consolidated Statement of Comprehensive Income under the heading

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Notes 71

Changes in the value of properties. In the Parent Company the result is and the need for impairment made previously is no longer considered 1 reported as other property management income/expense. necessary. The reversal is reported in the Statement of Comprehensive In those cases where Akademiska Hus uses part of a building for its Income. An examination of past impairments takes place on an indi- 2 own administration, the property is only classified as a property for vidual basis. 3 investment if an insignificant part is used for administrative purposes. 4 If a property is reclassified as a property held for resale or an inven- FINANCIAL INSTRUMENTS tory item, the property is reported at the assumed acquisition value, The general principles for the valuation of financial instruments are 5 equivalent to the fair value of the property at the time of reclassification. that financial investment assets and all derivatives should be valued 6 at fair value whilst other financial assets and financial liabilities are FAIR VALUE, PROPERTIES valued at the accrued acquisition value. 7 Akademiska Hus has an internal property valuation process that is Financial instruments are reported initially at the acquisition 8 highly developed and has been quality assured. Information regarding value, corresponding to the fair value of the instrument with an addi- valuation principles as well as levels of input data, assumptions and tion for transaction costs for all financial instruments apart from those 9 prerequisites are produced by the Company’s valuation specialists and that belong to the category Financial Assets, which are valued at fair 10 ultimately adopted by the President. value through profit or loss. Reporting subsequently takes place 11 Akademiska Hus valuation models comply with good market prac- depending on how they are classified, as stated below. tice in the property industry and the cash flows and yield targets that A financial asset or financial liability is recorded in the Statement 12 are used are justified based on both property-specific conditions and of Financial Position when the Company becomes a party to the con- 13 industry-specific conditions. The properties have been valued individ- tractual terms and conditions of the instrument or when applicable ually without any account being taken of portfolio effects. For a more according to ‘regular way purchase’ principles. Accounts receivable 14 detailed description of Akademiska Hus’ valuation methods, see note 16. are recorded in the Statement of Financial Position when an invoice 15 has been sent. A liability is recorded when the counter-party has per- CARRYING AMOUNT INVESTMENT PROPERTIES formed and there is a contractual obligation to pay, even if an invoice 16 Depreciation according to plan is based on the original acquisition has not yet been received. Accounts payable are recorded when an 17 value reduced by the estimated residual value and takes place on a invoice has been received. 18 linear basis over the estimated useful life of the asset. A financial asset is removed from the Statement of Financial Posi- Depreciation according to plan is normally carried out using the tion when the rights in the agreement are realised, fall due or the Com- 19 following percentages of the acquisition value: pany loses control over them. The same applies to part of the financial 20 asset. A financial liability is removed from the Statement of Financial 21 Land systems 5 % Position when the obligation in the agreement is discharged or is extin- guished in some other way. The same applies to a portion of a financial Buildings 1.7 % 22 liability. Building equipment 10 % 23 Land equipment 20 % The Group categorises its financial instruments as: 24 • Assets valued at fair value through profit or loss 25 Assets in this category are reported initially at the acquisition value, EQUIPMENT, FIXTURES AND FITTINGS i.e. fair value at the time of acquisition, and are subsequently valued 26 Equipment, fixtures and fittings mainly comprise IT equipment and continuously at fair value. The change in value is reported continuously office equipment. These are reported at the acquisition value reduced 27 through profit or loss. All Akademiska Hus investment assets and out- by depreciation according to plan and possible impairment standing derivatives (with a positive fair value) fall into this category. 28 Depreciation according to plan is based on the original acquisition • Loan receivables and accounts receivable 29 value reduced by the estimated residual value and takes place on a lin- Assets in this category are non-derivative financial assets with estab- ear basis over the estimated useful life of the asset. 30 lished or establishable payment flows that are not listed on an active Depreciation according to plan is normally carried out using the market. These assets are reported and valued on a continuous basis at 31 following percentages of the acquisition value: the accrued acquisition value. Akademiska Hus’s accounts receivable 32 also fall into this category and are reported and valued continuously Computer equipment 33 % at the acquisition value. At each period-end, an impairment examina- 33 Equipment, fixtures and fittings 20 % tion is made of this asset. Non-current security holdings fall into this 34 category and are valued at the accrued acquisition value unless an 35 impairment requirement has been identified. Depreciation according to plan of equipment, fixtures and fittings is • Liabilities valued at fair value through profit or loss 36 reported as an operating cost or under property administration. These liabilities are reported initially at the acquisition value and The profit or loss that arises on scrapping or disposal of equipment, 37 thereafter on an ongoing basis at fair value. The change in value is fixtures and fittings is reported as Other property management income reported on a continuous basis through profit or loss. Akademiska 38 or Other property management expense. Hus’ outstanding derivatives with a negative fair value fall into this 39 category. IMPAIRMENT • Other financial liabilities 40 Impairment takes place in those cases where the reported value of the Liabilities in this category are reported and valued at the accrued 41 asset exceeds the recovery value. Reported values for the Company’s acquisition value according to the annual equivalent rate method. assets are checked at each period-end to determine if there is any indi- 42 Direct costs when loans are raised are included in the acquisition cation of an impairment requirement. If there is such an indication, value. All debt financing is included in this category. Akademiska 43 the recoverable value of the asset is calculated. The recoverable value Hus’ accounts payable and other liabilities are classified under this is the higher of the value in use and the net realisable value. category but are reported at the acquisition value. When computing the value in use, future cash flows are discounted at a rate of interest before tax that it is envisaged will take into account Offsetting of financial assets and liabilities the market’s assessment of risk-free interest and risk linked to the Financial assets and liabilities are offset and reported at a net amount specific asset. For an asset which does not, independent of other assets, in the Statement of Financial Position when there is a legal right to off- generate any cash flow, the recoverable value of the cash-generating set and when there is an intention to settle the items at a net amount unit to which the asset belongs is calculated. or at the same time realise the asset and settle the debt. Information Reversal of previous impairments takes place when the recoverable relating to offset financial assets and liabilities under IFRS 7 can be value for a previously impaired asset exceeds the carrying amount seen in the notes to the balance sheet.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 72 Notes

1 Calculation of fair value, financial instruments Derivatives are valued at fair value and changes in value are reported When establishing the fair value of current investments, derivatives on an ongoing basis against net financial income and expense with the 2 and loan liabilities, the official market listing at the period-end is used exception of the outstanding derivatives, which comprise hedging 3 and calculation takes place according to generally accepted methods. instruments. In a hedging situation where the underlying Statement In those cases where such listings are not available, a valuation is made of Financial Position item is business-related, the changes in value of 4 through discounting of future cash flows at the listed market interest the derivative are reported against operating profit. Changes in value 5 rate for each term. Translation into Swedish kronor takes place at the attributable to the derivatives that comprise hedging instruments in a cash flow hedge are reported under Other comprehensive income, are 6 listed rate at the period-end. Calculated and estimated fair values are indicative and will not necessarily be realised. accumulated in equity and are reported against financial or operating 7 The nominal value of accounts receivable and accounts payable, profit at the time the underlying exposure affects the profit. 8 reduced by possible estimated credits, is assumed to be equivalent to Interest derivatives (interest future contracts, interest swap agree- their fair value. Information according to IFRS 13 about the level in ments, FRA contracts and interest options) are held mainly to secure 9 the fair value hierarchy for different items can be found in Note 33. the desired fixed interest period in existing debt financing. Interest 10 derivatives are valued on an ongoing basis at fair value and the effects Rent receivables, accounts receivable and other receivables attributable to the changes in value are reported against net interest 11 Rent receivables and accounts receivable are reported initially at income and expense in conjunction with hedging of fair value and against 12 the fair value and are then reported at the invoiced amount follow- Other comprehensive income in conjunction with cash flow hedging. 13 ing a deduction for any impairment (bad debts), which is equivalent The net of the accrued interest income and interest expense is allocated to the accrued acquisition value. The estimated term of rent receiva- to specific periods and expensed over the term of the derivative. 14 bles and accounts receivable is short and consequently the value is In conjunction with financing in a foreign currency, all future pay- 15 reported at the nominal amount without discounting. Doubtful ment flows are hedged so that no currency risk remains. Currency risk receivables are assessed individually and any impairment is hedging takes place with the aid of currency derivatives (currency 16 reported within operating costs. future contracts, currency swap agreements or combined with an 17 interest swap agreement). Currency derivatives are translated at the Cash and cash equivalents period-end exchange rate and when hedge reporting is applied, the 18 Cash and cash equivalents comprise cash and bank balances and effects of the currency translation of the derivative naturally meet the 19 current investments with a term shorter than three months. These effects of the currency translation of the debt in the financial result. 20 assets are regarded as being sellable immediately with a negligible Independent derivatives, i.e. derivatives that are not included in risk of changes in value, which means that the reported value (acqui- any hedging relationship, are valued at fair value and the change in 21 sition value plus accrued coupon) is equivalent to the fair value. value is recorded directly against the net interest income and expense. 22 With the aim of evening out price variations on the electricity mar- Current investments ket, and in doing so achieve an even trend for the Group’s electricity 23 Current investments with a term in excess of three months comprise costs, future electricity use is hedged with the aid of electricity futures. 24 interest-bearing securities and are reported and valued at fair value. Electricity futures are valued continuously at fair value and when 25 Changes in value (unrealised profits and losses) are reported on a con- hedge reporting according to the cash flow method is applied, the tinuous basis through net interest income and expense. changes in value are reported directly against Other comprehensive 26 In the Statement of Cash Flows, current investments with a term in income. The effects of price hedging, the difference between the elec- 27 excess of three months are not classified as cash and cash equivalents. tricity future’s hedged price and the average spot price during the term of the electricity future, are offset against profit and are transferred on 28 Loan financing maturity from equity and reported as an operating cost. Consequently, 29 All loan financing is reported initially at fair value, net after transaction the result of the electricity future and the Group’s physical electricity costs. Borrowing is subsequently reported at the accrued acquisition purchases constitute the actual electricity cost. 30 value and any difference between the amount received and the repay- 31 ment amount is reported in net interest income and expense divided Hedge accounting 32 over the loan period on application of the annual equivalent rate Akademiska Hus’ hedge accounting takes place through a division into method. two different methods of hedging depending on the aim of the hedging: 33 Borrowing that constitutes a hedged item in conjunction with fair fair value hedging and cash flow hedging. 34 value hedging is reported and valued on an ongoing basis after the In the case of fair value hedging, both the hedged item/exposure acquisition point at fair value with account taken of the hedged risk. and the hedging instrument are valued at fair value. The changes in 35 Changes in value are reported in net interest income and expense. value are reported continuously in profit or loss. 36 Loan financing in foreign currency is translated and the effects are With cash flow hedging, the hedging instrument is valued at the fair value at the same time that the hedged item in conjunction with 37 reported through profit or loss. The Group applies IAS 23 Borrowing Costs. IAS 23 means that the borrowing is valued according to the current valuation method (cate- 38 Group capitalises interest expense attributable to properties under gorisation). According to the demands for cash flow hedging, a change 39 construction that take a significant period of time to complete. Capital- in value attributable to a derivative that qualifies for hedge accounting ised interest expense has a positive effect on net interest income and is reported on an ongoing basis in Other comprehensive income and is 40 expense and a negative effect on the change in fair value of properties accumulated in equity until the underlying transaction/exposure 41 to the equivalent amount. Financing costs for properties under con- affects the Statement of Comprehensive Income. struction that do not take a significant period of time to complete are One of the criteria for hedge accounting to be applied is that the 42 charged in full to the financial result for each year. hedging relationship is expected to be effective both at the time of 43 entering into the relationship as well as during the hedging period. Accounts payable and other liabilities The ineffective part of the hedging, i.e. the difference between the Accounts payable and other liabilities have a short expected term and changes in value in the exposure (interest, electricity price or exchange are valued at the nominal value without discounting. rate risk) which are hedged in the underlying transaction/flow and the change in value in the hedging instrument’s (derivative’s) equivalent Financial derivatives risk is expensed. Derivatives are held primarily with the aim of securing long-term, When a hedging measure is entered into, the relationship between cost-effective debt financing and handling the Group’s financial risk the hedging instrument and the hedged item, along with the aim of the exposure by hedging interest and currency exposure against fluctua- hedging measure and the method used to calculate the effectiveness, tions in interest rates and exchange rates. are documented.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Notes 73

PROVISIONS a deduction for accumulated depreciation, impairments and reversed 1 Provisions are reported in the Statement of Financial Position when impairments. The depreciation period is based on each property’s use- the Company has a formal or informal undertaking because of an event ful life. 2 that has occurred and where it is probable that an outflow of resources During the year 0 (0) properties were revised upwards. Depreciation 3 is required to settle the undertaking and a reliable estimate of the on the upwards revaluation occurs linearly with such an amount that 4 amount can be made. the revaluation is completely written off when the properties are otherwise fully depreciated. 5

PARENT COMPANY, ACCOUNTING POLICIES 6 The Parent Company has prepared its annual accounts according to Shares in subsidiaries the Annual Accounts Act and the Swedish Accounting Standards Board Shares in subsidiaries are reported at the acquisition value. 7 recommendation RFR 2 Reporting for Legal Entities and applicable 8 statements from the Swedish Financial Reporting Board. Remuneration to employees RFR 2 means that in the annual accounts for the legal entity, the The Parent Company’s pension undertakings have been calculated 9 Parent Company shall apply all EU-endorsed IFRSs and statements as and reported based on the Safeguarding of Pension Commitments Act. 10 far as this is possible within the framework of the Annual Accounts Act Application of the Safeguarding of Pension Commitments Act is a pre- 11 and the Pension Obligations Vesting Act and with consideration given requisite for the right to make a tax deduction. to the link between accounting and taxation. The recommendation 12 states the exceptions and addenda that are to be made to IFRS. The dif- Deferred tax 13 ferences between the Group’s and the Parent Company’s accounting The amounts that are allocated to untaxed reserves comprise taxable policies are stated below. temporary differences. Because of the link between accounting and 14 taxation, the deferred tax liability that is attributable to the untaxed 15 Amended accounting policies reserves is not reported separately in a legal entity. These are thus 16 No amendments to RFR 2 with a material impact on the Parent Compa- reported at the gross amount in the Statement of Financial Position. ny’s financial statements were made during 2017. The appropriations are reported at the gross amount in the Statement 17 of Comprehensive Income. 18 Properties Properties are reported in a legal entity at the acquisition value with 19 20

21 3 Estimates and assessments IAS 19, a number of assumptions are made, including the discount rate 22 in current value assessment, expected salary increases, inflation, staff 23 When preparing reports in compliance with IFRS, the Executive turnover, remaining period of service for those covered by the pension Management and the Board of Directors must make assessments and plan as well as expected mortality assumptions. The levels of these 24 assumptions that affect the reported asset and liability items and parameters are adapted to company-specific conditions and partly to 25 income and cost items in the final accounts as well as information pro- normal external conditions (see also Note 29). vided generally, including contingent liabilities. These assessments are 26 based on historical experience and different assumptions the Execu- SENSITIVITY ANALYSIS, IMPACT ON PROFIT 27 tive Management and the Board of Directors have considered reasona- The sensitivity analysis shows how the pre-tax profit, return on operat- ble under the prevailing circumstances. The conclusions drawn form ing capital and fair value of the properties would be affected in the 28 the basis for decisions regarding reported values of assets and liabili- event of changes in different variables. The analysis shows the impact 29 ties in those cases where these cannot be established easily through on an annual basis at full effect. 30 information from other sources. The actual outcome could differ from Changes in the cost of capital or yield target are factors that affect these assessments if other assumptions are made or if other conditions the fair value most. The impact on profit of a change in value, however, 31 emerge. Assessments could have a material impact on the Akademiska would not affect the cash flow as it is unrealised. In the sensitivity 32 Hus profit and financial position, particularly within regard to valua- analysis, the current lease portfolio has been taken into account with tion of properties (see also Note 16). regard to rental revenue and vacant space. 33 When calculating the Group’s pension liability in accordance with 34

SENSITIVITY ANALYSIS, IMPACT ON PROFIT 35 36 Impact on Impact on return pre-tax profit, on operating capital, Impact on fair value, Impact on fair value, 37 Change SEK m percentage points SEK m1 percentage points 38 Rental revenue, +/– one percentage point +/–56 +/–0.1 +/–402 +/–0.5 39 Vacant space, +/– one percentage point +/–53 +/–0.1 +/–471 +/–0.6 Operating costs, +/– one percentage point +/–8 +/–0.0 +/–84 +/–0.1 40 of which media provision +/–5 +/–0.0 +/–42 +/–0.1 41

Cost of capital, + one percentage point –4,880 0.2 –4,880 –6.1 42

Cost of capital, – one percentage point 5,387 –0.2 5,387 6.7 43 Yield target, + one percentage point –6,655 0.2 –6,655 –8.3 Yield target, – one percentage point 10,067 –0.3 10,067 12.5

1) Refers only to properties subjected to discounted cash flow analysis.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 74 Notes

1 4 Segment reporting 2 The Group’s operations are controlled and reported by unit. Segment ‘Investments’ refer to gross investments in properties, construction of 3 reporting has been prepared using the same accounting policies properties in progress and equipment, fixtures and fittings. ‘Other 4 applied to the Group as a whole. Revenue and assets per segment are operations’ refer to operations that are not attributable to the segments. based on the tenant’s geographical location whilst assets and liabilities Net operating income is the most important measure of perfor- 5 are based on the tenant’s physical location. Commencing on 1 January mance and is reported and followed up on a regular basis by the Group’s 6 2017, reporting on Akademiska Hus’ operating segments are divided supreme decision-maker. The profit after net operating income is not into South, Mid-Sweden and North. Comparative figures for 2016 have reported and is not followed up for each segment. Properties are the 7 been adapted to the new division. asset measurement that is reported internally and is followed up for 8 All revenue is generated in Sweden and all units engage in property each segment. Internal follow-up of other assets and liabilities only 9 management. takes place on the overall level for the Group. For details of larger customers, see Note 6. 10 No sales between the segments have taken place. 11 Segment information Total, operating Other 12 1 Jan. 2017 – 31 Dec. 2017 South Mid-Sweden North segments operations1 Group 13 Rental revenue 1,504,067 2,553,792 1,523,781 5,581,640 284 5,581,924 Other property management income 68,307 63,788 92,121 224,216 0 224,216 14 Total income 1,572,374 2,617,580 1,615,902 5,805,856 284 5,806,140 15

16 Operating costs –233,176 –322,762 –227,765 –783,703 –957 –784,660 17 Maintenance costs –157,710 –341,381 –116,353 –615,444 –32 –615,476 18 Property administration –50,559 –60,749 –39,004 –150,312 –158,588 –308,900

19 Other property management expenses –77,100 –138,536 –53,608 –269,244 1,171 –268,073 Total costs, property management –518,545 –863,428 –436,730 –1,818,703 –158,406 –1,977,109 20

21 NET OPERATING INCOME 1,053,829 1,754,152 1,179,172 3,987,153 –158,122 3,829,031 22

23 Central overheads –66,809 24 Net interest income/expense –188,464

25 Profit before changes in value and taxes 3,573,758

26 Change in value, properties 940,159 2,780,678 1,258,529 4,979,366 4,979,366 27 Change in value, financial instruments –242,268 28 PROFIT BEFORE TAX ACCORDING TO 29 THE STATEMENT OF COMPREHENSIVE INCOME 8,310,856

30 Total assets include: 31 Properties 18,712,579 41,509,060 20,222,731 80,444,370 — 80,444,370 32 of which invested during the year 458,353 1,740,123 457,418 2,655,894 — 2,655,894 33

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Notes 75

Segment information Total, operating Other 1 1 Jan. 2016 – 31 Dec. 2016 South Mid-Sweden North segments operations1 Group 2 Rental revenue 1,518,077 2,491,086 1,472,862 5,482,025 6 5,482,031 Other property management income 69,080 76,179 38,474 183,733 267 184,000 3 Total income 1,587,157 2,567,265 1,511,336 5,665,758 273 5,666,031 4 5

Operating costs –226,487 –322,291 –215,364 –764,142 –4 –764,146 6 Maintenance costs –171,374 –404,548 –110,417 –686,339 — –686,339 7 Property administration –49,112 –54,408 –35,356 –138,876 –154,731 –293,607 8 Other property management expenses –76,760 –107,054 – 67,633 –251,447 –3,617 –255,064 Total costs, property management –523,733 –888,301 –428,770 –1,840,804 –158,352 –1,999,156 9 10

NET OPERATING INCOME 1,063,424 1,678,964 1,082,566 3,824,954 –158,079 3,666,875 11

12 Central overheads –85,264 13 Net interest income/expense –308,371 14 Profit before changes in value and taxes 3,274,470 15

Change in value, properties 762,474 2,182,491 737,235 3,682,200 16

Change in value, financial instruments –241,038 17 PROFIT BEFORE TAX ACCORDING TO 18 THE STATEMENT OF COMPREHENSIVE INCOME 6,714,402 19

Total assets include: 20

Properties 17,378,818 36,988,259 18,645,783 73,012,860 — 73,012,860 21 of which invested during the year 368,717 1,670,519 797,298 2,836,534 2,836,534 — 22 1) ‘Other operations’ refer to operations that are not attributable to the respective segment. 23

24 5 Categorised operating costs 25

Group Parent Company 26 2017 2016 2017 2016 27

Functions reported in the Income Statements 28

Property management –1,977,109 –1,999,156 –1,958,704 –1,977,319 29 Central administration costs –66,809 –85,264 –66,809 –85,264 30 TOTAL OPERATING COSTS ACCORDING TO FUNCTION –2,043,918 –2,084,420 –2,025,513 –2,062,583 31

32 CATEGORISED FUNCTION COSTS Energy, fuel and water –539,896 –531,559 –539,896 –531,559 33 Property administration –66,429 –37,281 –64,463 –33,536 34

Maintenance costs, material and services purchased –715,656 –808,670 –718,659 –799,160 35

Site leasehold charges –82,717 –61,586 –82,717 –61,586 36 Property tax –3,725 –3,399 –3,725 –3,399 37 Personnel costs –402,046 –419,261 –384,568 –412,452 38 Depreciation –3,932 –5,518 –3,932 –5,518 39 Other costs –229,517 –217,14 6 –227,553 –215,373 TOTAL CATEGORISED OPERATING COSTS –2,043,918 –2,084,420 –2,025,513 –2,062,583 40 41

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 76 Notes

1 6 Rental revenue 2 All properties are leased under operational lease agreements and gen- year includes KSEK 512,717 (474,979) for variable charges. Lund Uni- 3 erate rental revenue. The rental revenue during the period amounted versity and Karolinska Institutet account for 11.2 per cent and 10.6 per 4 to KSEK 5,581,924 (5,482,031) and the direct costs for the properties cent of rental revenue, respectively. during the period totalled KSEK 1,977,109 (1,999,156). Profit for the 5

6 CONTRACTED RENTAL REVENUE AS AT 31-12-2017 LEASE TERMS AS AT 31-12-2017 ACCORDING TO THE SIZE OF THE LEASE 7 Number of Contracted Number of Contracted 8 Due date leases annual rent Proportion, % Annual rent leases annual rent Proportion, % 9 Non-residential premises Non-residential premises

10 2018 222 477,267 9 > 70,000 3 392,835 7

11 2019 258 572,164 10 30,000 – 70,000 33 1,398,176 25 2020 232 871,933 16 10,000 – 30,000 126 2,118,734 39 12 2021 179 667,426 12 7,500 – 10,000 44 384,398 7 13 2022 49 256,303 5 5,000 – 7,500 63 394,276 7 14 2023 35 363,435 6 2,500 – 5,000 108 406,548 7 15 2024 and later 149 2,261,897 41 < 2,500 747 375,458 7 16 Other 309 28,037 1 Other 309 28,037 1

17 TOTAL 1,433 5,498,463 100 TOTAL 1,433 5,498,463 100

19 7 Other property management income 20

21 Group Parent Company 2017 2016 2017 2016 22 Parking revenue 66,275 61,533 66,275 61,533 23 Profit on the sale of other non-current assets — — 168,628 36,089 24 Income from external property management assignments 25 and similar assignments 49,286 54,766 49,286 54,766 Income from services performed on behalf of tenants 78,217 65,076 78,217 65,076 26 Other 30,438 2,625 30,437 2,669 27 TOTAL 224,216 184,000 392,843 220,133 28

29 30 8 Other property management expenses 31 Group Parent Company 32 2017 2016 2017 2016 33 Site leasehold charges, property tax and other risk costs –92,144 –70,871 –92,144 –70,871 34 Studies –25,072 –18,299 –25,072 –18,299

35 Loss on the sale and disposal of other noncurrent assets — –24,765 –3,004 –12,283

36 Costs for external property management assignments and similar assignments –44,188 –39,568 –44,188 –39,568 Costs for services performed on behalf of tenants –71,247 –60,371 –71,247 –60,371 37 Other –35,422 –41,190 –35,422 –44,162 38 TOTAL –268,073 –255,064 –271,077 –245,554 39

40 41 9 Depreciation, impairments and reversed impairments in property management 42 Group Parent Company 43 2017 2016 2017 2016 Properties — — –1,155,992 –1,034,789 Equipment, fixtures and fittings –3,932 –5,518 –3,932 –5,518 TOTAL –3,932 –5,518 –1,159,924 –1,040,307

In the Group, KSEK 1,966 (3,746) has been reported as property administration and KSEK 1,966 (1,772) as operating costs.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Notes 77

The proportion of women (based on the average number of employees) 1 10 Employees and personnel costs in the Parent Company and the Group is 29 per cent (28). 2 The average number of employees was as follows: GENDER DIVISION, BOARD, GROUP MANAGEMENT AND 3 OTHER PERSONS IN EXECUTIVE POSITIONS 2017 2016 4 The Board comprises 9 (6) members elected at the Annual General AKADEMISKA HUS AB Meeting and 2 (2) members appointed by the employees. 4 (3) of the 5 Head Office, Gothenburg 93 94 members are women, i.e. 44 per cent (38). 6 South 118 117 Overall management of the Group rests with the Executive Man- Mid-Sweden 139 131 agement, which comprises 5 (7) men and 5 (5) women. The Executive 7 North 99 98 Management team comprises the President, Chief Financial Officer and 8 Subsidiaries — — Vice President, Project Manager, three Market Area Directors, Admin- istrative Manager, Corporate Communications Officer, Head of Innova- 9 GROUP, TOTAL 449 440 tion and Sustainable Development and the Human Resources Director. 10

SALARIES, OTHER REMUNERATION AND SOCIAL SECURITY COSTS 12 2017 2016 13 Group Parent Company Group Parent Company SALARIES AND REMUNERATION 14 Board members, President and Vice President 7,578 7,578 7,115 7,115 15

Other employees 249,403 249,403 263,833 263,833 16 TOTAL 256,981 256,981 270,948 270,948 17

SOCIAL SECURITY COSTS 18 Board members, President and Vice President 3,942 3,942 4,081 4,081 19 (of which pension costs) (2,629) (2,629) (2,557) (2,557) 20 Other employees 125,139 125,139 120,041 124,041 21 (of which pension costs) (70,979) (70,979) (70,227) (70,227) TOTAL 129,081 129,081 124,122 128,122 22 (of which pension costs) (73,608) (73,608) (72,784) (72,784) 23

The Group’s and Parent Company’s outstanding pension obligations KSEK 5,483 (3,443). The subsidiaries do not have any employees and 25 to the President and other members of Executive Management total no salaries have been paid. 26 REMUNERATION TO THE BOARD 27 2017 2016 28 Invest- Remu- Invest- Remu- ment neration Finance Audit ment neration Finance Audit 29 Director’s Commit- Commit- Commit- Commit- Director’s Commit- Commit- Commit- Commit- fees tee tee tee tee fees tee tee tee tee 30 1 Chair Anitra Steen 298 30 20 — — 115 — 10 — — 31 Chair Eva-Britt Gustafsson2 — — — — — 135 — 5 — 10 32 Member Caroline Arehult3 75 — — 10 — — — — — — Member Britta Burreau 145 — — 10 15 138 — — 20 — 33 Member Kristina Ekengren — — — — — — — — — — 34 3 Member Peter Gudmundson 75 — — — 15 — — — — — 35 Employee representative Thomas Jennlinger — — — — — — — — — — 36 Employee 37 representative Anders Larsson — — — — — — — — — — 38 Member Christer Nerlich4 105 — — — 20 — — — — — Member Gunnar Svedberg 145 — 20 — — 138 — 10 — — 39 Member Örjan Wikforss3 75 10 — — — — — — — — 40 Member Ingemar Ziegler 145 40 — 10 — 145 — — 10 20 41 Member Olof Ehrlén5 70 — — — — 135 — — — — 42 Member Ingela Lindh6 35 — — — — 138 — — — — Member Leif Ljungqvist7 — — — — — — — — — — 43 Member Pia Sandvik8 — — — — — 68 — — 10 10 TOTAL 1,168 80 40 30 50 1,012 25 40 40

1) Anitra Steen was elected to serve as chairperson of the Board of Directors 5) Olof Ehrlén left his position as member of the Board of Directors in conjunction with the general meeting in April 2016. in April 2017. 2) Eva-Britt Gustafsson stepped down as chairperson of the Board of Directors 6) Ingela Lindh left her position as member of the Board of Directors in conjunction with the general meeting in April 2016. in December 2016. 3) Caroline Arehult, Peter Gudmundson and Örjan Wikforss were elected to serve 7) Leif Ljungqvist left his position as member of the Board of Directors as members of the Board of Directors in April 2017. in April 2016. 4) Christer Nerlich was elected to serve as a member of the Board of Directors 8) Pia Sandvik left her position as member of the Board of Directors in January 2017. in April 2016.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 78 Notes

REMUNERATION TO SENIOR EXECUTIVES 1 2017 2016 2 Basic salary15 Pension cost Basic salary15 Pension cost 3 CEO/President Kerstin Lindberg Göransson 4,028 1,064 3,482 933 4 Chief Financial Officer/ Vice President Catarina Fritz1 2,235 537 540 138 5 Administrative Manager Jonas Bjuggren2 1,577 357 — — 6 Market Area Director Peter Bohman3 1,616 359 1,586 375 7 Market Area Director Birgitta van Dalen4 1,554 729 1,314 553 8 Head of Innovation and 5 9 sustainable development Ulf Däversjö 1,302 284 1,580 370 Project Manager Hayar Gohary6 1,467 327 — — 10 Human Resources Director Marie Hallander Larsson7 1,222 256 — — 11 Market Area Director Magnus Huss8 1,459 311 — — 12 CIO Cecilia Nielsen 1,226 254 1,068 204 13 Vice President Michael Walmerud9 — — 1,735 513 14 Regional Director, South Tomas Ringdahl — — 1,533 359 15 Regional Director, East Lars Hagman — — 1,187 252

16 Regional Director, Stockholm Sten Wetterblad — — 1,915 481 Regional Director, North David Carlsson10 — — 1,039 311 17 Regional Director, North Roger Granberg11 — — 270 64 18 General Counsel Carolin Åberg-Sjöqvist — — 1043 267 19 CFO Jonas Ragnarsson12 — — 283 59 20 Human Resources Director Kristina Korsgren13 — — 250 78 21 Acting Director of Human Resources Fredrik Färm14 — — 668 144 22 TOTAL 17,686 4,478 19,493 5,101

23 1) Catarina Fritz took up the position of Chief Financial Officer in October 2016. 9) Michael Walmerud left Executive Management in October 2016. 2) Jonas Bjuggren joined Executive Management in March 2017. 10) David Carlsson left Executive Management in September 2016. 24 3) Peter Bohman was Regional Director, Uppsala, in 2016. In January 2017 11) Roger Granberg joined Executive Management in October 2016 25 he became Market Area Director. and left in December. 4) Birgitta van Dalen was Regional Director, West, in 2016. In January 2017 12) Jonas Ragnarsson left Executive Management in February 2016. 26 she became Market Area Director. 13) Kristina Korsgren left Executive Management in February 2016. 27 5) Ulf Däversjö was Head of Innovation in 2016. In January 2017 he became 14) Fredrik Färm took up the position of acting Human Resources Director Head of Innovation and Sustainable Development. in March 2016 and left Executive Management in January 2017. 28 6) Hayar Gohary joined Executive Management in January 2017. 15) No payments were made in addition to the above reported basic salary. 7) Marie Hallander Larsson joined Executive Management in March 2017. 29 8) Magnus Huss joined Executive Management in January 2017. 30

31 11 Fees and disbursements to auditors out of pocket expenses 32

33 Group and Parent Company 2017 2016 34 KPMG AB 35 Audit assignment 1,038 899 36 Audit work in addition to the audit assignment — 204 37 Tax consulting 2 63 38 Other services 87 90 39 TOTAL 1,127 1,256

40 KPMG AB was elected to serve as auditors at the Annual General Meeting on 28 April 2014. 41 ‘Audit assignment’ refers to payment to the auditor for the statutory such an examination or the performance of other such duties. ‘Tax 42 audit, such as work necessary to submit the audit report. ‘Audit work in consulting’ is self-explanatory. ‘Other services’ refers mainly to fees 43 addition to the audit assignment’ in effect refers to what can be desig- for consultation in conjunction with examination of tax returns and nated quality assurance services (for example, examination of a pro- consultation regarding financial instruments, the Sustainability spectus for an EMTN programme) as well as the provision of advice or Report and accounting-related issues. other assistance as a result of observations made in conjunction with

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Notes 79

12 Financial income and expense 1 2 Group Parent Company 3 2017 2016 2017 2016 OTHER INTEREST INCOME AND SIMILAR PROFIT/LOSS ITEMS 4 Interest income, other1 9,707 8,862 9,707 8,862 5 Changes in value, independent derivatives 29,115 69,817 29,115 69,817 6

Total 38,822 78,679 38,822 78,679 7

8 RESULT, FINANCIAL INCOME 38,822 78,679 38,822 78,679 9

10 OTHER INTEREST EXPENSE AND SIMILAR PROFIT/LOSS ITEMS Interest expense, other1 –198,171 –317,233 –299,339 –392,616 11 Changes in value, independent derivatives –90,164 –286,497 –90,164 –286,497 12 Changes in value, fair value hedges –181,219 –24,358 –181,219 –24,358 13

RESULT, FINANCIAL EXPENSE –469,554 –628,088 –570,722 –703,471 14

15 RESULT, NET FINANCIAL INCOME AND EXPENSE –430,732 –549,409 –531,900 –624,792 16 1) of which interest income/interest expense deriving from financial instruments that are not valued at fair value through profit or loss. –123,973 –157,74 0 –225,142 –233,123 17

Group Parent Company 19

Changes in value, financial items, are as follows: 2017 2016 2017 2016 20 UNREALISED CHANGES IN VALUE 21 Independent derivatives 10,478 –70,174 10,478 –70,174 22 Fair value hedging, hedging instruments –181,219 –24,358 –181,219 –24,358 23 TOTAL –170,741 –94,532 –170,741 –94,532 24

REALISED CHANGES IN VALUE 25 Independent derivatives –71,527 –146,506 –71,527 –146,138 26

TOTAL –71,527 –146,506 –71,527 –146,138 27

28 TOTAL CHANGES IN VALUE –242,268 –241,038 –242,268 –241,038 29

The headings in the income statement changed in 2017, for which reason comparative figures for 2016 were adjusted to the new division. 30

31 13 Appropriations and untaxed reserves 32

Parent Company 33 31 Dec. 2017 31 Dec. 2016 34 APPROPRIATIONS 35

Change in tax allocation reserve 164,683 –136,189 36 Difference between recorded depreciation and depreciation according to plan 16,400 –38,483 37 TOTAL 181,083 –174,672 38

39 UNTAXED RESERVES Tax allocation reserve, provision made 2011 — 437,485 40 Tax allocation reserve, provision made 2012 449,374 449,374 41 Tax allocation reserve, provision made 2013 441,894 441,894 42

Tax allocation reserve, provision made 2014 4 47,887 4 47,887 43 Tax allocation reserve, provision made 2015 507,298 507,298 Tax allocation reserve, provision made 2016 537,145 537,145 Tax allocation reserve, provision made 2017 602,169 — Additional depreciation 1,220,439 1,204,040 TOTAL 4,206,207 4,025,123

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 80 Notes

1 14 Tax 2 The following components are included in the Group and Parent Company tax expense: 3 Group Parent Company 4 2017 2016 2017 2016 5 TAX ON PROFIT FOR THE YEAR

6 Current tax on profit for the year –389,372 –352,204 –389,372 –352,204 Total current tax –389,372 –352,204 –389,372 –352,204 7

8 DEFERRED TAX ATTRIBUTABLE TO TEMPORARY DIFFERENCES 9 Financial instruments 18,173 –10,488 18,173 –10,488 10 Properties –1,454,600 –1,175,219 –115,395 –122,472 11 Tax allocation reserve –36,230 –29,962 — — 12 Pension provisions 3,843 1,498 — —

13 Total deferred tax –1,468,814 –1,214,171 –97,222 –132,960 TOTAL TAX ON PROFIT FOR THE YEAR –1,858,186 –1,566,375 –486,594 –485,164 14

16 The difference between the reported tax expense and tax expense based on the current tax rate comprises the following components: Group Parent Company 17 2017 2016 2017 2016 18 Reported profit before tax 8,310,856 6,714,402 2,076,348 1,799,809 19 Tax at the current tax rate –1,828,388 –1,477,169 –456,796 –395,958 20 Tax effect of expenses that are not tax deductible/taxable 21 (permanent differences): Non-deductible expenses –196,044 –225,910 –196,044 –225,910 22 Non-taxable revenues 167,453 139,477 167,453 139,477 23 Taxable standard interest calculated on the tax allocation reserve –1,207 –2,773 –1,207 –2,773 24 TOTAL REPORTED TAX EXPENSE –1,858,186 –1,566,375 –486,594 –485,164 25

26 Reported deferred tax receivables/liability: 27 Group Parent Company 28 31-12-2017 31-12-2016 31-12-2017 31-12-2016

29 Deferred tax assets attributable to temporary differences Financial instruments 28,387 10,215 28,387 10,215 30 Properties — 17,615 — 17,615 31 Pension provisions 45,420 35,268 — — 32 Total, reported deferred tax receivables 73,807 63,098 28,387 27,830 33

34 Deferred tax liabilities attributable to temporary differences 35 Tax allocation reserve –656,869 –620,638 — —

36 Properties –10,859,206 –9,422,219 –2,342,247 –2,244,467 Cash flow hedges –1,248 –2,076 –1,248 –2,076 37 Other –24 19 –43 — 38 Total, reported deferred tax liability –11,517,3 47 –10,044,914 –2,343,538 –2,246,543 39 TOTAL, REPORTED DEFERRED TAX LIABILITY –11,443,540 –9,981,816 –2,315,151 –2,218,713 40

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Notes 81

The following deferred tax assets/liabilities refer to items where a change has been reported in Other comprehensive income. 1

Group Parent Company 2

31-12-2017 31-12-2016 31-12-2017 31-12-2016 3 Cash flow hedge 4 – currency derivatives 320 –159 320 –159 5 – electricity derivatives 508 –11,407 508 –11,407 6 – actuarial gains and losses 6,306 5,251 — — TOTAL DEFERRED TAX REPORTED IN OTHER COMPREHENSIVE INCOME 7,134 –6,315 828 –11,566 7 8 UNREPORTED DEFERRED TAX consolidated accounts do not include any material unreported tempo- 9 No deferred tax in respect of untaxed reserves has been reported in the rary differences between carrying amounts and tax values for assets Parent Company. The deferred tax liability related to untaxed reserves and liabilities. All tax deficit deductions within the Group can be uti- 10 totals KSEK 925,365 (885,527) and is included in these reserves. The lised for an unlimited period in the future. 11

12 15 Dividend 13 14 The dividend paid to the shareholder on 15 May 2017 totalled SEK Available for allocation at the Annual General 1,393,000,000 (1,290,000,000). The dividend per share was SEK Meeting: 15 Profit brought forward SEK 959,880,931 652.46 (604.22). 16 As regards the dividend for the year, the Board proposes a dividend Profit for the year SEK 1,589,753,596 of SEK 763.47 per share, for a total of SEK 1,630,000,000, to be paid to 17 Total SEK 2,549,634,527 the shareholder as instructed by the owner. A decision regarding a divi- 18 dend will be reached by the shareholder at the Annual General Meeting. 19 The dividend has not been recorded as a liability in the Annual Report. The Board of Directors and the President propose that the profit be allocated in such a way that SEK 1,630,000,000 is paid to the share- 20 holder and SEK 919,634,527 is carried forward. 21

22 PROFIT USED AS A BASIS FOR CALCULATION OF DIVIDEND, SEK M Outcome Changes in value Profit used for 23 consolidated results in the Group calculation of dividend 24 Income from property management 5,806 — 5,806 25 Property management expenses –1,977 — –1,977 NET OPERATING INCOME 3,829 — 3,829 26 Central administration costs –67 — –67 27

Net interest income/expense –188 — –188 28 PROFIT BEFORE CHANGES IN VALUE AND TAXES 3,574 — 3,574 29 Changes in value, properties 4,979 –4,979 — 30 Changes in value, financial instruments –242 189 –53 PROFIT/LOSS BEFORE APPROPRIATIONS AND TAXES 8,311 –4,790 3,521 31 Tax/current tax –1,858 1,054 –804 32

PROFIT AFTER TAX 6,453 –3,736 2,717 33

34 Dividend, 60% of the profit available for the payment of a dividend 1,630 35 The dividend as decided at the Annual General Meeting held on 28 April 2017 was SEK 1,393 million. 36 37

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 82 Notes

1 16 Properties (Group) 2 The fair value of properties has changed during the year as follows: 3

4 Group transactions that have been completed on the market and, as far as possible, using comparable properties. Each year, Akademiska Hus has Change in property holdings, in SEK 1,000 31-12-2017 31-12-2016 5 the yield target, cost of capital and other valuation prerequisites veri- Opening fair value 73,012,860 66,574,882 6 fied by two external valuation institutes, NAI Svefa and DTZ. + Investment in new construction Both the cost of capital for discounting the cash flow as well as the 7 and redevelopment 2,554,724 2,761,150 yield target have been differentiated for each property depending on 8 + Acquisitions — — the town, location, lease term and type of premises. The risks are thus 9 + Capitalised interest expense 101,170 75,384 analysed in several dimensions and are generally assessed to be higher for properties with shorter leases, installation-intensive premises and – Sales –203,750 –45,500 10 properties in less attractive locations. +/– Change in value, unrealised 4,979,366 3,646,944 11 Expansion reserves, SEK 1,213 million (2 per cent) have been valued Of which change in value due to using the location prices for construction rights with a deduction for 12 a change in the cost of capital and development costs, supplemented by developer calculations. In some yield requirement 3,394,628 2,435,057 13 cases, the planning conditions for new construction are unclear and Of which change in value due to adjusted consequently the pure land values have been used to establish the fair 14 value index (valuation status, average value. The expansion reserves include construction rights covering a remaining term, property type) 18,318 –179,181 15 gross area of approximately 1.65 million square metres. Of which capitalised interest expense –101,170 –75,384 16 SEK 6,950 million (9 per cent) of the fair value has been set based on Of which other change in value 1,667,590 1,466,452 other valuation methods. This primarily relates to properties with a 17 CLOSING FAIR VALUE 80,444,370 73,012,860 special risk assessment where a more individually adapted cash flow 18 method has been used to be able to adapt the length of the estimate and yield requirement based on needs. This group also includes objects val- 19 2017 2016 ued by external valuers or at indicative selling price. 20 Changes in value, property holdings The total fair value of properties includes new construction in progress amounting to SEK 5,717 million (4,802), which has also been val- 21 Positive 6,116,866 5,006,937 ued using the internal cash flow valuation with a deduction for remain- 22 Negative –1,137,500 –1,359,994 ing investment. 23 Result from sales and disposals — — The properties are on level 3 in the fair value hierarchy. Positive — 35,257 24 Valuation conditions 2017 Negative — — 25 Yield requirements and cost of capital declined by between 0.05 and TOTAL CHANGES IN VALUE, PROPERTIES 4,979,366 3,682,200 0.90 percentage points during the year, due to general price-driving 26 factors in the property market for community properties. Overall, the 27 positive change in value attributable to changes in yield requirements VALUATION MODELS/METHODS and cost of capital in 2017 amounted to SEK 3,395 million (2,435). 28 The fair value of the Group’s properties as at 31 December 2017 Well-located, efficient properties with a strong customer base and good has been set using an internal property valuation. The valuation 29 rental potential are in greatest demand and are naturally less sensitive has been conducted using different valuation methods as follows: 30 to external changes and are therefore assigned a lower yield requirement. Characteristic of Akademiska Hus are long leases with stable, credit- 31 SEK m Share, % worthy customers. The majority of tenants have a public principal and 32 Cash flow method 72,281 90 thus a very good credit rating, which means a low rent risk during the 33 Location price method (expansion reserves) 1,213 2 term of the lease. Around 90 per cent of income derives from the domi- Other valuation method 6,950 8 nant customer group, universities and colleges. All centres of education, 34 apart from Chalmers University of Technology, have the Swedish state TOTAL 80,444 100 35 as principal and thus have a high credit rating. The average remaining lease term is 5.52 years (6.01). The valuation divided the leases into three 36 SEK 72,281 million (90 per cent) of the fair value has been set through categories based on average remaining lease term. For valuation prop- 37 an internal cash flow valuation, where the cash flow figures used com- erties with a longer remaining lease term, the relative risk is lower as the cash flow valuation is based predominantly on hedged revenue flows. 38 prise the net operating income for each property. Rental revenue was calculated based on current leases and an assessment of market rent The city, town and location classifications have been based in part 39 level is made after the term of the lease has expired. Operating costs on the general division of the property market. Larger and important 40 are estimated based on the normalised historical outcome of each cities and towns have been assigned a higher degree of attractiveness property, while maintenance costs and property administrative costs from, for example, a demographic, employment and economic point of 41 are assessed based on actual costs and key indicators for the industry. view. From the point of view of higher education and research, in addi- 42 For an initial calculation period of 10 years, a current value is com- tion to Sweden’s three largest cities – Stockholm, Gothenburg and Malmö – the classic university towns of Lund and Uppsala, and to a 43 puted for the cash flow generated each year using a nominal cost of capital. The residual value from year 11 is calculated based on the market’s certain extent Linköping and Umeå, are considered to be more attrac- actual yield targets. Residual value is in turn calculated at the current tive and more stable over the long term. The division into different value using nominal cost of capital. The property’s fair value comprises cities, towns and locations reflects the demand on the market and the the sum of the current cash flows during the calculation period and the attractiveness of the properties. Inner-city locations in Stockholm and current residual value. Gothenburg are in greatest demand and most attractive while smaller, The starting point when choosing the cost of capital is the nominal rural locations are less in demand. interest rate on the secondary market for government bonds with a Akademiska Hus operates in a specific segment of the property term equivalent to the length of the calculation period. A risk premium market, which means that our properties are more adapted to special- is added to cover the market risk and the property-related risk. ist uses and consequently they have a slightly more uncertain residual The yield targets are assessed, as far as possible, using the property value than for more general properties, such as office buildings and

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Notes 83

residential buildings. This means that many of our properties are not Sensitivity analysis 1 available for new tenants or other purposes without substantial rede- The sensitivity analysis shows how the fair value is affected in conjunc- velopment. After an initial calculation period, assessment of the resid- tion with changes in different variables. The impact on profit of a change 2 ual value needs to reflect the more property specific risks in more con- in value, however, would not affect the cash flow as it is unrealised. 3 crete terms. An assessment of the uncertainty regarding modernity, 4 standard/condition, technical risk and redevelopment/adaptation Impact on fair requirements is made at the point at which residual value is calculated. Impact on fair value, percent- 5 These risks are quantified mainly in the form of charges to cash flow Change value, SEK m age points 6 and in the direct yield target. Rental revenue, +/– one per cent +/–402 0.5 7 The cost of capital for the cash flow varies for different properties Vacant space, +/– one percentage point +/–471 0.6 within the range 5.93–11.89 per cent depending on the lease term, 8 town/city, location, and type of premises. The long-term yield target Operating costs, +/– one per cent +/–84 0.1 varies between 4.15 per cent and 9.70 per cent depending on the town/ of which media provision +/–42 0.1 9 city, location and type of premises. Maintenance costs, +/– SEK 10/m² 537 0.8 10 The average yield target and cost of capital for each segment are Property administration, +/– SEK 10/m² 537 0.8 11 shown in the table below. Cost of capital, + one percentage point –4,880 –6.1 12 Cost of capital, – one percentage point 5,387 6.7 31-12-2017 31-12-2016 13 Yield target, + one percentage point –6,655 –8.3 Cost of Cost of 14 Yield target, % capital, % Yield target, % capital, % Yield target, – one percentage point 10,067 12.5 South 5.6 7.7 5.8 7.9 15 A change in the maintenance cost that affects the profit and return on equity has Mid-Sweden 4.9 7.0 5.3 7.4 been calculated based on actual maintenance costs. The impact on fair value has 16 been calculated based on a standard maintenance cost and standard property North 5.7 7.9 6.1 8.2 administration cost in the valuation model. 17 Group 5.3 7.4 5.6 7.7 18 Other 19 There are no limits with regard to the right to sell the properties or Other assumptions use the rental revenue. 20 The following assumptions form the basis for the internal market All properties are leased under operational lease agreements and valuation: 21 generate rental revenue. The rental revenue during the period amounted to KSEK 5,581,924 (5,482,031) and the direct costs for the 22 Valuation assumptions properties during the period totalled KSEK 1,977,109 (1,999,156). 23 > 10 years, > 6 years < = 10 years, < Lease term = 6 years External valuation 24 Division into town, city, location 26 towns, cities, locations To assure the internal valuation, selected properties are valued each 25 year by external valuation companies. During the year, 76 valuation Special adaptation/ Installation-intensive premises/ 26 type of premises non-installation-intensive premises buildings/sellable units and seven expansion reserves at a fair value of SEK 21,226 million were valued externally, corresponding to approxi- 27 Calculation period 10 years mately 26 per cent of Akademiska Hus’ total fair value. The 2017 valua- 28 Inflation assumption, year 1 1.0 5% tions were carried out by NAI Svefa AB, which is authorised by the Inflation assumption, years 2–10 2.0 % Swedish Society of Real Estate Economics. The external valuations 29 Vacant space Actual and/or 5 % confirm the reliability of the internal valuation model. 30

Property administration SEK 45/m² 31 Maintenance costs, non- 32 installation-intensive premises SEK 100/m² Maintenance costs, installation- 33 intensive premises SEK 140/m² 34

35 Assumptions about inflation have been made based on the views of 36 different forecasters, such as the National Institute of Economic Research, the Riksbank and other banks. The long-term inflation 37 assumption of 2 per cent corresponds with the Riksbank’s long-term 38 inflation target. The rent trend during the term of the lease is estimated at maximum of inflation (CPI), with consideration taken to the 39 index share of the lease. Actual vacancy is applied as it occurs and after 40 the contract period a standard vacancy rate of 5 per cent is applied. 41 Standard formulas are applied for property administration costs and maintenance costs. 42

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 84 Notes

1 17 Properties (Parent Company) 18 Equipment, fixtures and fittings 2 Carrying amount for properties amounts to KSEK 42,951,358 Group Parent Company 3 (41,590,753). The amount includes land, land systems, buildings, build- 31-12-2017 31-12-2016 31-12-2017 31-12-2016 4 ing equipment and land equipment. Fiscal residual value amounts to Opening acquisition KSEK 25,093,306 (25,190,871). value 76,255 75,851 76,255 75,851 5 Purchases 944 2,457 944 2,457 6 The carrying amount of properties changed as follows during the year: Transferred from Parent Company 7 new construction 31-12-2017 31-12-2016 in progress — — — — 8 Opening acquisition value 53,186,067 50,481,344 Sales and disposals — –2,053 — –2,053 9 Investment in new construction and CLOSING 10 redevelopment 2,554,724 2,761,150 ACCUMULATED ACQUISITION VALUE 77,199 76,255 77,199 76,255 11 Acquisitions — — Sales and disposals –101,104 –56,427 12 Opening depreciation –65,151 –61,662 –65,151 –61,662 CLOSING ACCUMULATED 13 ACQUISITION VALUE 55,639,687 53,186,067 Sales and disposals — 2,029 — 2,029 14 Opening revalutions 7,253,723 7,424,690 Depreciation for the year –3,932 –5,518 –3,932 –5,518 15 Revaluations for the year — — CLOSING Depreciation for the year on revaluations –170,967 –170,967 16 ACCUMULATED CLOSING ACCUMULATED DEPRECIATION –69,083 –65,151 –69,083 –65,151 17 REVALUATIONS 7,082,756 7,253,723 18 CARRYING AMOUNT 8,117 11,104 8,117 11,104 19 Opening depreciation –18,670,770 –17,659,736 20 Reclassifications –6,002 –42,401

21 Sales and disposals 47,013 21,312 Depreciation for the year –1,002,259 –989,945 22 CLOSING ACCUMULATED 23 DEPRECIATION ACCORDING TO PLAN –19,632,018 –18,670,770 24

25 Opening impairments –178,267 –346,791

26 Reclassifications 6,002 42,401 Sales and disposals 15,966 — 27 Reversed impairments 26,224 137,4 83 28 Impairments for the year –8,992 –11,360 29 CLOSING ACCUMULATED IMPAIRMENTS –139,067 –178,267 30

31 CARRYING AMOUNT 42,951,358 41,590,753

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Notes 85

19 Shares in Group companies 1 2 Parent Company 31-12-2017 31-12-2016 3 Opening acquisition value 650 650 4 Acquisition of subsidiaries — — 5

Sale of subsidiaries — — 6 CARRYING AMOUNT 650 650 7

8 Specification of the Parent Company’s shareholdings in Group companies: 9 Parent Company 10 Share 31-12-2017 31-12-2016 Registered Total number of equity Carrying Carrying 11 Subsidiaries Company reg. no. office of shares in %1 amount amount 12 Akademiska Hus Utveckling och Support AB 556610-2975 Gothenburg 500 (500) 100 (100) 500 500 Kunskapsmiljön 7 AB 556966-0037 Gothenburg 500 (500) 100 (100) 50 50 13 Akademiska Hus Holding AB 556981-6803 Gothenburg 100 (100) 100 (100) 100 100 14 TOTAL 650 650 15

1) Corresponds to the number of votes. 16 17 20 Derivatives (Group) 18 19 Derivatives are used to handle interest risk exposure and to eliminate capital amounts and accrued interest. The Group’s risk management 20 currency risks in conjunction with financing in a foreign currency and is presented in Note 34 Financial risk management. for electricity price risk management. The fair value of interest and Carrying amounts, derivatives, are broken down as follows: 21 cross currency interest rate swap agreements includes the underlying 22

23 31-12-2017 31-12-2016 Assets Liabilities Assets Liabilities 24 NON-CURRENT Independent derivatives 25

– interest rate derivatives 605,162 528,433 586,884 616,432 26 Hedging instruments, fair value hedging 27 – interest rate derivatives 28 – cross currency interest rate swap agreements 448,196 413,342 1,582,460 15,661 Hedging instruments, cash flow hedging 29 – currency derivatives 30 – electricity derivatives –6,307 3,037 31 TOTAL, NON-CURRENT 1,053,358 935,468 2,172,381 632,093 32

33 CURRENT Independent derivatives – interest rate derivatives 580,899 14,723 3,399 33,124 34 – currency derivatives 35 Hedging instruments, fair value hedging 36 – cross currency interest rate swap agreements 37 Hedging instruments, cash flow hedging 38 – currency derivatives 16,856 53,798 211,152 24,794 – electricity derivatives 415 39 TOTAL, CURRENT 597,755 68,521 214,551 58,333 40

41 TOTAL, DERIVATIVES 1,651,114 1,003,989 2,386,932 690,426 42

43 Fair value is equivalent to the carrying amount in the table above. Derivatives and swap agreements are on level 2 in the fair value hierarchy, see Note 33.

The following table shows the maturity structure for forecast electricity use together with electricity derivatives and currency derivatives entered into with the aim of hedging the electricity price.

Forecast use, MWh Hedging level, price, % 2017 410,000 65 2018 410,000 44 2019 410,000 30

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 86 Notes

1 21 Other non-current receivables 23 Other receivables 2 Group Parent Company Group Parent Company 3 31-12-2017 31-12-2016 31-12-2017 31-12-2016 31-12-2017 31-12-2016 31-12-2017 31-12-2016 4 Interest-bearing Interest-bearing promissory note — — — — promissory note 5 (reclassified from Non-interest-bearing non-current 6 promissory note — — — — receivables) — 192,911 — 192,911 7 Other non-interest VAT receivable 340,442 243,834 340,442 243,834 bearing receivables 208,931 223,516 208,931 223,516 8 Settlement, taxes TOTAL 208,931 223,516 208,931 223,516 9 and charges 856,982 491,799 856,982 491,799 Other current 10 Of the Group’s non-current receivables, KSEK 120,851 is expected to be receivables 123,007 87,287 123,007 87,286 11 realised within five years of the year-end and KSEK 88,080 later than TOTAL 1,320,431 1,015,831 1,320,430 1,015,830 12 five years.

13 Other non-interest-bearing receivables changed as follows: Other current receivables are reported at amortised cost. 14 Group Parent Company 15 31-12-2017 31-12-2016 31-12-2017 31-12-2016 24 Prepaid expenses and accrued income 16 Opening balance 223,516 343,273 223,516 343,273 Group Parent Company 17 Purchases for the year 176,860 39,751 176,860 39,751 31-12-2017 31-12-2016 31-12-2017 31-12-2016 18 Allocation against Accrued rent 35,539 35,103 35,539 35,103 profit or loss for 19 Accrued interest the year –162,198 –151,390 –162,198 –151,390 income — 1,199 — 1,199 20 Reclassification to Prepaid operating current receivables –29,248 –8,118 –29,248 –8,118 21 costs 30,655 28,285 30,655 28,285 CLOSING BALANCE 208,931 223,516 208,931 223,516 22 Other 62,179 13,037 62,179 13,037

23 TOTAL 128,373 77,624 128,373 77,624

24 22 Rent receivables and accounts receivable 25 Group Parent Company 25 Maturity structure, receivables 26 31-12-2017 31-12-2016 31-12-2017 31-12-2016 27 Group Parent Company Rent receivables and 31-12-2017 31-12-2016 31-12-2017 31-12-2016 28 accounts receivable 317,251 318,183 317,251 318,183 Receivables Provision, doubtful 29 expected to be rent receivables and cleared within one 30 accounts receivable –828 –1,053 –828 –1,053 year of the year-end 1,784,754 1,640,403 1,784,753 1,640,402 TOTAL 316,423 317,130 316,423 317,130 31 Receivables 32 expected to be cleared within 1–5 33 Rent receivables and accounts receivable are reported at amortised years of the year-end 838,969 1,945,880 838,969 1,945,880 cost. The fair value of rent receivables and accounts receivable concurs 34 Receivables with the carrying amount as of the year-end and there is no impair- expected to be 35 ment requirement. cleared later than Of the rent receivables and accounts receivable that had fallen due five years after 36 as at 31 December 2017, KSEK 53,925 had fallen due by 1–5 days, the year-end 1,001,549 450,017 1,001,549 450,017 37 KSEK 3,901 had fallen due by 5–30 days, KSEK 1,394 had fallen due TOTAL 3,625,272 4,036,300 3,625,271 4,036,299 38 by 30–60 days and KSEK 16,713 had fallen due by more than 60 days. Receivables falling due do not include impaired receivables. 39

40 The provision for doubtful rent receivables and accounts receivable changed as follows: 41

42 Group Parent Company 43 31-12-2017 31-12-2016 31-12-2017 31-12-2016 Opening balance –1,053 –1,891 –1,053 –1,891 Provisions for the year –472 –92 –472 –92 Reversed provisions — 885 — 885 Established credit losses 697 45 697 45 CLOSING BALANCE –828 –1,053 –828 –1,053

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Notes 87

26 Cash and cash equivalents/ 28 Loans 1 Cash and bank balances 2 The Group’s financing takes place mainly through the public financing 3 Current investments comprise temporary surplus liquidity, invested programmes. Through their standardised terms and conditions, these in the short term, totalling KSEK 5,249,516 (4,692,814) and collateral permit rational, cost-effective financing. The Group has international 4 ECP and EMTN programmes, as well as a domestic commercial paper granted attributable to Credit Support Annex (CSA) agreements total- 5 ling KSEK 231,144 (131,164). Blocked bank funds in respect of pledged programme. The MTN programme has not been updated since 2009. assets for exchange-cleared derivatives are included to the amount of Bank financing is used to a limited extent. The average capital for bank 6 financing during 2017 was SEK 258 million (231). KSEK 64,148 (297,757) in the reported amount for cash and bank bal- 7 ances for the Group and the Parent Company. This is a buffer to cover Loans in the Group are reported at amortised cost. The Group’s risk expected daily collateral requirements. management is presented in Note 34 Financial risk management. 8 9 FINANCING COST Group Parent Company Net interest income and expense amounted to SEK –430 million (–549) 10 31-12-2017 31-12-2016 31-12-2017 31-12-2016 and the average net liability portfolio was SEK 27,265 million (25,443). 11 Current investments 5,480,660 4,823,977 5,480,660 4,823,977 The financing cost amounted to 1.79 per cent (2.15), calculated as inter- 12 Cash and bank est expense in relation to average interest-bearing net loan liability, balances 998,824 545,640 998,678 545,492 excluding cash and bank holdings. The changes in value in the financial 13 derivative instruments correspond to an increase in interest expense TOTAL 6,479,484 5,369,617 6,479,338 5,369,469 14 of 0.85 per cent (0.85). 15 FINANCING COST, BREAKDOWN, % Cash and cash equivalents are reported and valued according to the 16 category ‘assets valued at fair value through profit or loss’. Fair value is equivalent to the carrying amount of cash and bank holdings and cur- 2017 2016 2015 2014 2013 17 rent investments. Cash and bank holdings are on level 1 and current Loan financing cost, 18 investments are on level 2 in the fair value hierarchy. including charges, % 0.74 0.83 1.38 2.01 2.24 19 Interest swaps, net interest, % 0.20 0.47 0.58 0.42 0.39 20 27 Hedge reserve/Fair value reserve Financing cost, % 0.94 1.30 1.96 2.43 2.63 21

Group Parent Company Changes in value, 22 financial derivatives, % 0.85 0.85 –0.74 2.61 –0.01 31-12-2017 31-12-2016 31-12-2017 31-12-2016 23 TOTAL FINANCING COST 1.79 2.15 1.22 5.04 2.62 Opening balance 9,592 –31,415 9,592 –31,415 24 Change in value, derivatives (cash flow EFFECT OF FINANCIAL DERIVATIVES ON PROFIT 25 hedging) Independent interest rate derivatives are reported at market value 26 – currency derivatives –2,178 –53 –2,178 –53 (fair value) and variations in market value are recognised in net inter- 27 – electricity est income and expense. Interest derivatives are mainly entered into derivatives –2,154 51,872 –2,154 51,872 with the aim of extending the fixed interest period in the liability port- 28 Transferred to folio, which largely consists of financing at variable interest rates. Fall- 29 operating profit 726 754 726 754 ing interest rates entail a negative impact on profit from these interest rate derivatives; the opposite is true when interest rates rise. The 30 Tax effect 828 –11,566 828 –11,566 changes in value relate to the changed current value of future cash 31 CLOSING BALANCE 6,814 9,592 6,814 9,592 flows from interest rate derivatives, at prevailing interest rates. Conse- 32 quently these do not have any immediate effect on cash flow, as long as The tax effect, KSEK 828 (–11,566) refers to the change for the year. they remain unrealised. Certain interest rate derivatives are closed 33 The closing deferred tax receivable/payable is reported in Note 14 Taxes. and settled on an ongoing basis (monthly or quarterly) and replaced 34 with new ones, which means that profits are continuously realised. Falling interest rates, combined with interest rate derivatives for pur- 35 poses of extension, mean that interest expense will be higher than if 36 the extension had not been implemented. However, the lower interest rate can be used when refinancing and with sales of fixed interest at a 37 later date. As time passes, no surplus or deficit values of interest rate 38 derivatives will remain at maturity. 39 The currency and interest risks that arise in conjunction with long- term financing, usually bonds in foreign currency, are hedged with cur- 40 rency-interest rate swaps. The changes in value for each instrument 41 can be attributed to changes in both exchange rates and interest rates. Hedge accounting is applied for these forms of financing, where only 42 the inefficiency that arises due to different valuation practices is recog- 43 nised in the income statement.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 88 Notes

1 Borrowing can be broken down as follows, SEK m: Group Parent Company 2 31-12-2017 31-12-2016 31-12-2017 31-12-2016 3 Carrying Carrying Carrying Carrying 4 amount Fair value amount Fair value amount Fair value amount Fair value

5 NON-CURRENT LOANS Category, other financial liabilities 6 Bonds & MTN 770 824 770 837 770 824 770 837 7 EMTN 12,574 14,119 12,049 12,565 12,574 14,119 12,049 12,565 8 Other loans 1,339 1,428 356 426 1,339 1,428 356 426 9 TOTAL 14,682 16,372 13,175 13,828 14,682 16,372 13,175 13,828 10

11 Category, financial liabilities at fair value through profit or loss according to the fair 12 value hedging method 13 Bonds & MTN — — — — — — — —

14 EMTN 10,516 10,581 8,840 8,833 10,516 10,581 8,840 8,833 Other loans — — 790 790 — — 790 790 15 TOTAL 10,516 10,581 9,630 9,623 10,516 10,581 9,630 9,623 16

17 TOTAL NON-CURRENT LOANS 25,198 26,953 22,805 23,451 25,198 26,953 22,805 23,451 18

19 CURRENT LOANS 20 Category, other financial liabilities

21 Commercial paper — — 1,500 1,503 — — 1,500 1,503 ECP 4,768 4,774 7,436 7,4 49 4,768 4,774 7,436 7,4 49 22 Bonds & MTN — — — — — — — — 23 EMTN 1,900 1,902 1,000 1,011 1,900 1,902 1,000 1,011 24 Other loans 746 746 15 15 746 746 15 15 25 TOTAL 7,414 7,423 9,951 9,978 7,414 7,423 9,951 9,978 26

27 Category, financial liabilities at fair value through profit or loss according to the fair 28 value hedging method 29 Bonds & MTN — — — — — — — —

30 EMTN 2,128 2,128 — — 2,128 2,128 — —

31 Other loans — — — — — — — — TOTAL 2,128 2,128 — — 2,128 2,128 — — 32

33 TOTAL CURRENT LOANS 9,541 9,551 9,951 9,978 9,541 9,551 9,951 9,978 34

35 TOTAL LOANS 34,740 36,503 32,757 33,429 34,740 36,503 32,756 33,429 36 37 The above table shows nominal amounts excluding accrued coupon interest. 38 Fixed interest Variable interest Loans Derivatives Total Loans ECP Derivatives Total Total 39 2018 4,226 –2,820 1,406 500 4,793 2,308 7,601 9,007 40 2019 1,420 0 1,420 1,000 0 0 1,000 2,420 41 2020 1,650 300 1,950 720 0 –300 420 2,370 42 2021 5,055 –2,455 2,600 200 0 2,245 2,445 5,045 43 2022 1,000 1,200 2,200 0 0 –1,200 –1,200 1,000 2023 409 –209 200 0 0 226 226 426 2024 200 300 500 0 0 –300 –300 200 2025 and later 13,336 –6,959 6,377 111 0 7,066 7,177 13,554 TOTAL 27,296 –10,643 16,653 2,531 4,793 10,045 17,369 34,022

The above table shows financing (nominal amount) together with the exchange rate effect is eliminated. A positive figure means that the outstanding interest and currency derivatives. Loans and derivatives Group pays interest and a negative figure means that the Group in foreign currency have been translated at the year-end exchange rate. receives interest. As all loans raised in a foreign currency are swapped to Swedish kronor,

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Notes 89

MATERIAL CONTRACTUAL TERMS AND CONDITIONS Salary risk – The current value of the defined benefit commitment is 1 The general terms and conditions for the EMTN and MTN programmes calculated in the light of future salaries for members of the plan. Major include a clause which specifies that if the Swedish state ceases, directly salary increases compared with what was included in the actuarial cal- 2 or indirectly, to hold more than 50 per cent of the shares, equivalent to culations entail a risk that the Group’s liability could increase, as could 3 more than 50 per cent of the shareholding and more than 50 per cent of the Group’s pension expense. 4 the votes, the loans and any interest shall fall due for repayment imme- Income base amount – The current value of the defined benefit obli- diately. The contractual terms and conditions for the short-term financ- gations is calculated in the light of future increases in the income base 5 amount. A larger increase than assumed in the actuarial calculations ing programmes do not include any equivalent undertaking. Ever since 6 the programmes were established, the Group’s policy has been not to means a risk that the Group’s liability could increase, as could the accept any terms and conditions that require, for example, that a cer- Group’s pension expense. 7 tain rating, equity ratio or interest coverage ratio be maintained. The actuarial computation of the pension commitments and pen- 8 sion costs is based on the following assumptions: HEDGE ACCOUNTING 9 When financing in a foreign currency, all future payment flows are Assumptions 2017 2016 10 hedged so that the exchange risk is eliminated. Through cross currency Discount rate, % 2.50 2.65 interest rate swap agreements, all interest payments, both fixed and 11 Salary increase, % 3.00 1.50 variable, are hedged as well as future repayments. All the measures 12 taken have the express purpose of hedging and eliminating an exchange Inflation, % 1.90 1.50 13 rate risk so that all financing is denominated in Swedish kronor. Effec- Income base amount, % 2.50 2.50 14 tive hedging means that changes in the value of the hedged position and Personnel turnover, % 2.00 2.00 the actual hedging transaction on balance counteract each other. Remaining period of service, years 12.10 15.20 15 Mortality DUS14 DUS14 16 29 Provisions for pensions 17 Assumptions regarding life expectancy are based on public statistics 18 The Group’s pension commitments include both defined contribution and experience of mortality calculations in Sweden and have been and defined benefit pension plans according to collective bargaining adopted in consultation with actuarial experts. These assumptions 19 agreements. result in the following average remaining life expectancy for a person 20 who retires at the age of 65: DEFINED CONTRIBUTION PENSION PLANS 21 The Group’s defined contribution pension plans, ITP1 and Alternative Estimated average remaining life 22 ITP (a pension for high-income earners) and flex pension cover all expectancy, years 31-12-2017 31-12-2016 23 Group employees. The defined contribution pension plans mainly com- Retirement at the year-end prise a retirement pension, sickness pension and family pension. The Men 21.8 20.4 24 premiums are paid continuously throughout the year to different insurance companies. The premiums are based on salary. Women 24.4 23.3 25 The total cost for the financial year for defined contribution pension Retirement 20 years after the year-end 26 plans excluding payroll tax (Group and Parent Company) amounted to Men 23.6 22.3 27 KSEK 24,722 (22,788). Women 25.5 24.6 28 DEFINED BENEFIT PENSION PLANS 29 All Group employees are covered by the Group’s defined benefit pension The following amounts regarding the defined benefit pension cost are plan, ITP 2. According to this plan, the employees are entitled to pension reported in the Income Statement: 30 benefits based on their pensionable income as well as the number of 31 years of service. The pension plan mainly comprises a retirement pen- Amount reported in the Income Statement 2017 2016 sion, sickness pension and family pension. The pension commitments are Benefits earned during the year 27,564 25,074 32 secured through provisions in the PRI system as well as the ITP plan Interest on pension provision 11,547 11,837 33 family pension, sickness pension and occupational group life through PARTS OF THE DEFINED BENEFIT 34 insurance premiums. All pension commitments which the Akademiska PENSION COST REPORTED IN THE Hus Group took over from the National Board of Public Building when PROFIT FOR THE YEAR 39,111 36,911 35 the Company was formed on 1 October 1993 are defined benefit plans, 36 secured through provisions in the Statement of Financial Position, The defined benefit costs have been reported as a personnel cost and guaranteed by the National Debt Office and administered by the National 37 interest cost respectively. Government Employees’ Pension Board (SPV). All defined benefit pen- 38 sion commitments are credit-insured by PRI Pensionsgaranti. The following actuarial gains and losses have been reported under 39 The most recent actuarial calculation of the current value of the Total comprehensive income: defined benefit commitment was carried out by an authorised actuary 40 on 31 December 2017. When calculating the current value of the defined Total amount reported under 41 benefit commitment and associated costs for employment during the Other comprehensive income 31-12-2017 31-12-2016 current and previous periods, the Projected Unit Credit Method was used. 42 Revaluation of the net defined The ITP 2 plan exposes the Group to a number of actuarial risks, benefit liability — — 43 such as an interest risk, risk regarding life expectancy and the increase in the income base amount. Actuarial gains and losses that arise as a result of changes in Interest risk – A reduction in the bond rate of interest will increase demographic assumptions — — the pension liability. Possible future falls in the interest rate on first- Actuarial gains and losses that class mortgage bonds in SEK could thus entail a risk that the Group’s arise as a result of changes in pension expense and undertakings could increase. financial assumptions 41,807 24,207 Life expectancy risk – The current value of the defined benefit obli- Actuarial gains and losses that arise gation is calculated with consideration given to the Group’s best assess- as a result of changes in experience –13,142 –340 ment regarding mortality for members of the plan, both during and TOTAL AMOUNT REPORTED UNDER after employment. There is a risk that life expectancy will increase for OTHER COMPREHENSIVE INCOME 28,665 23,867 the members of the plan, which would in that case increase both the pension costs and the Group’s commitment.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 90 Notes

1 The change for the period in the defined benefit obligation can be seen Pension commitments and provisions for pension commitments for the in the following table: defined benefit plans in the Parent Company have changed as follows: 2

3 Change in the defined benefit obligation Pension commitments 31-12-2017 31-12-2016 for the period 31-12-2017 31-12-2016 4 Opening balance 282,484 271,800 Opening balance 442,794 401,434 Pension costs, defined benefit plans 10,265 13,223 5 Service costs during the period 27,564 25,074 Interest expense 11,451 11,085 6 Net interest cost 11,547 11,837 Payments –14,131 –13,624 7 Actuarial gains (+)/losses (–) CLOSING BALANCE 290,069 282,484 8 Changes in demographic assumptions — — Changes in financial assumptions 41,807 24,207 9 The total pension cost in the Parent Company is broken down as follows: Experience-based adjustments –13,142 –340 10 Pension payments –14,048 –19,418 11 2017 2016 CLOSING BALANCE 496,522 442,794 Pension costs, defined benefit plans 10,265 13,223 12 Interest part of the pension cost 11,451 11,085 13 The estimated term of the Group’s defined benefit pension commit- PENSION COSTS, 14 ment can be seen in the following table: DEFINED BENEFIT PLANS 21,716 24,308 15 Estimated term for Pension costs, defined 16 the pension commitment 31-12-2017 31-12-2016 contribution plans 24,722 22,788 17 Fall due for payment within Employer’s contribution and tax one year of the year-end 14,530 14,048 18 on the yield, other pension costs 10,942 11,131 Fall due for payment 1–5 years TOTAL PENSION COSTS 57,380 58,227 19 after the year-end 55,143 56,358 20 Fall due for payment later than five years after the year-end 426,849 372,388 ACTUARIAL ASSUMPTIONS 21 TOTAL 496,522 442,794 The actuarial calculation of pension commitments and pension costs in 22 the Parent Company is based on the actuarial assumptions laid down in the PRI system and by the Swedish Financial Supervisory Authority. 23 Below is a sensitivity analysis of the defined benefit obligations reflect- 24 ing changes in the applied assumptions for the discount rate, inflation 25 and wage growth. The sensitivity analysis is based on the change in one 30 Other liabilities assumption while all other assumptions held constant. Such a scenario 26 is unlikely in practice, and changes in certain assumptions can be cor- Group Parent Company 27 related. 31-12-2017 31-12-2016 31-12-2017 31-12-2016

28 Other interestbearing Sensitivity analysis, pension obligations 31-12-2017 31-12-2016 liabilities 8 57,982 1,762,042 8 57,982 1,762,042 29 Recorded pension obligation Other non-interest 30 under the reported assumptions 496,522 442,794 bearing liabilities 359,391 409,892 359,991 410,492 Discount rate increases 31 TOTAL, OTHER by 0.5 percentage points 449,377 408,846 LIABILITIES 1,217,373 2,171,934 1,217,973 2,172,534 32 Discount rate decreases 33 by 0.5 percentage points 550,356 481,364 Other liabilities are reported and valued according to the Other finan- Inflation increases 34 by 0.5 percentage points 534,786 487,919 cial liabilities category. The fair value is equivalent to the carrying amount of other liabilities. The Group’s other liabilities are on level 2 35 Wage growth increases in the fair value hierarchy. by 0.5 percentage points 527,007 470,442 36 The Parent Company has entered into a supplementary agreement, 37 a Credit Support Annex (CSA) to the ISDA agreement, with the aim of FUTURE PAYMENTS handling exposure to counter-party risks in derivatives. The agreement 38 The Group is expected to pay KSEK 33,778 (39,111) in charges for the means that the parties mutually undertake to furnish collateral in the 39 defined benefit plan during the forthcoming financial year. form of cash and cash equivalents or securities with a good rating for undervalues in outstanding derivatives. The agreement in turn gives 40 PROVISIONS FOR PENSIONS AND SIMILAR OBLIGATIONS IN the secured party right of disposal of collateral received. As of the year- 41 THE PARENT COMPANY end, the Group received collateral through the CSA agreements total- 42 The reported pension liability in the Parent Company comprises: ling KSEK 858,000 (1,762,000). Of the Group’s other liabilities, KSEK 1,143,418 falls due for pay- 43 31-12-2017 31-12-2016 ment within one year of the year-end, KSEK 67,674 within one to five years of the year-end, and KSEK 6,281 later than five years after the PRI pensions 228,182 216,604 year-end. Other pensions 61,887 65,880 TOTAL 290,069 282,484

Other pensions in the Parent Company mainly refer to the historical pension liability that was taken over from the National Board of Public Building when the Akademiska Hus Group was founded in 1993.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Notes 91

31 Accrued expenses and prepaid income 32 Maturity structure, liabilities 1 2 Group Parent Company Group Parent Company 31-12-2017 31-12-2016 31-12-2017 31-12-2016 31-12-2017 31-12-2016 31-12-2017 31-12-2016 3 Prepaid rental revenue 1,553,637 1,4 87,165 1,553,637 1,4 87,165 Liabilities due for 4 payment within one Accrued salary and 5 year of the year-end 13,222,607 14,305,575 13,225,360 14,308,328 personnel costs 37,730 35,098 37,730 35,098 Liabilities due for 6 Accrued operating and payment within 1–5 maintenance costs 81,371 89,139 81,371 89,139 7 years of the year-end 9,708,292 14,984,129 9,708,291 14,984,129 Accrued investments 1,021 195,441 1,021 195,441 Liabilities due for 8 Accrued interest 208,566 196,289 208,566 196,289 payment later than 9 five years after the Other interim year-end 28,440,133 18,988,500 19,105,292 11,065,086 10 liabilities 67,821 18,395 67,821 18,395 TOTAL 51,371,031 48,278,204 42,038,943 40,357,543 TOTAL 1,950,146 2,021,527 1,950,146 2,021,527 11 12

13 mation that is attributable to one or more of the above-mentioned levels. 33 Financial instruments valued at fair value 14 The classification is determined by the lowest level in the hierarchy for The following table shows the financial assets and liabilities that are the information that has a material impact on the value. 15 valued at fair value. They are classified in a hierarchy, comprising three The Group mainly holds derivatives that are on level 2. The valua- 16 levels and based on the information used to set their fair value. tion of the instruments is done according to the zero coupon method, Level 1 refers to when fair value is set based on listed prices on active which means that all the future cash flows of the instrument are set at 17 markets for identical assets and liabilities. Level 2 refers to when fair the current value. The zero coupon interest rates used to discount the 18 value is set based on observable data other than listed prices on active cash flows are calculated with the aid of STIBOR/LIBOR for short-term 19 markets. Level 3 refers to when the set fair value is essentially based on interest rates and swap notations for longer terms. The source of this data that is not observable, i.e. the Company’s own assumptions. information is real-time data from Thomson/Reuters. 20 The fair value of financial assets and liabilities is set by using infor- 21

22 2017 Level 1 Level 2 Level 3 Total 2016 Level 1 Level 2 Level 3 Total ASSETS ASSETS 23 Investments Investments 24

– current investment — 5,249,516 — 5,249,516 – current investment — 4,692,812 — 4,692,812 25 Independent derivatives Independent derivatives 26 – interest rate derivatives — 607,833 — 607,833 – interest rate derivatives — 590,283 — 590,283 27 – currency derivatives — — — — – currency derivatives — — — — – cross currency interest – cross currency interest 28 rate swap agreements — — — — rate swap agreements — — — — 29 Hedging instruments, Hedging instruments, 30 fair value hedging fair value hedging – interest rate derivatives — — — — – interest rate derivatives — — — — 31 – cross currency interest – cross currency interest 32 rate swap agreements — 1,026,425 — 1,026,425 rate swap agreements — 1,582,461 — 1,582,461 33 Hedging instruments, Hedging instruments, cash flow hedging cash flow hedging 34

– currency derivatives — 16,856 — 16,856 – currency derivatives — 211,152 — 211,152 35 – electricity derivatives — — – electricity derivatives — 3,037 — 3,037 36 TOTAL ASSETS — 6,900,630 — 6,900,630 TOTAL ASSETS — 7,079,745 7,079,745 37

38 LIABILITIES LIABILITIES Independent derivatives Independent derivatives 39 – interest rate derivatives — 956,497 — 956,497 – interest rate derivatives — 665,218 — 665,218 40

– currency derivatives — — — — – currency derivatives — — — — 41 – cross currency interest – cross currency interest 42 rate swap agreements — — — — rate swap agreements — — — — Hedging instruments, Hedging instruments, 43 fair value hedging fair value hedging – interest rate derivatives — — — — – interest rate derivatives — — — — – cross currency interest – cross currency interest rate swap agreements — — — — rate swap agreements — — — — Hedging instruments, Hedging instruments, cash flow hedging cash flow hedging – currency derivatives — 52,506 — 52,506 – currency derivatives — 24,793 — 24,793 – electricity derivatives –5,014 — — –5,014 – electricity derivatives 415 — — 415 TOTAL LIABILITIES –5,014 1,009,003 — 1,003,989 TOTAL LIABILITIES 415 690,011 — 690,426

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 92 Notes

1 34 CURRENCY EXPOSURE RISK Financial risk management (Group) A currency risk is the risk that exchange rate changes will have an 2 Akademiska Hus carries on active debt management where the strategy impact on the Income Statements and Consolidated Balance Sheets. 3 is to weigh up the financial risks, given the existing mandate, against The policy is that all currency exposure risk in conjunction with financing in foreign currency should be eliminated as the operation 4 the desired low and stable financing cost over time. The two key policy documents adopted by the Board are: is denominated exclusively in Swedish kronor. All payment flows in 5 • Finance Policy: Describes the long-term strategic orientation, the foreign currency attributable to financing are hedged with the aid of 6 Group’s approach to financial risks and the mandate to handle these forward exchange swaps and cross currency swap agreements. risks, as well as the allocation of liability. 7 CURRENCY BREAKDOWN, LOANS AND DERIVATIVES, SEK M • Plan for handling financial risks (Risk Plan): Justifies annual man- 8 dates for financial risk management in the light of the risk scenario Original currency Loans Derivatives Total and existing exposure. Also includes analysis of developments in 9 AUD 582 –582 — financial markets, including both opportunities and challenges from 10 the point of view of debt management. CHF 7,977 –7,977 — 11 EUR 1,769 –1,769 — INTEREST RISK 12 GBP 277 –277 — The term ‘interest risk’ refers to the risk that the Group’s net interest HKD 1,375 –1,375 — 13 income and expense may vary due to a change in market interest rates. A balance must be reached between saving and uncertainty on the one JPY 726 –726 — 14 hand and higher costs (risk premium) and predictability on the other. SEK 16,578 17,444 34,022 15 The average fixed interest period is a measure of the sensitivity in net USD 5,334 –5,334 — interest income and expense in conjunction with a change in the mar- 16 TOTAL 34,618 –596 34,022 ket interest rates; the longer the fixed interest period, the longer it 17 takes for an interest rate change to be reflected in current cash flow. 18 Since it is not possible to achieve a desired fixed interest on individual The table above shows the nominal amounts. The nominal amounts financing occasions, the Group uses interest derivatives as a means of have been recalculated at the year-end rate. 19 adjusting and securing the desired fixed interest period. 20 According to the Finance Policy, there should be a mandate to man- LIQUIDITY AND REFINANCING RISK Refers to the risk that the Group will be exposed to higher than 21 age interest rate risk in the three main sub-portfolios as follows: Long-term bond portfolio – bonds denominated in SEK with fixed expected expenses or that financing potential is limited when loans are 22 interest and maturity terms in excess of 15 years. These bonds repre- due to be refinanced. The aim is to limit the costs by seeking to strike a balance between short-term, medium-term and long-term financing, 23 sent a significant interest risk exposure, which justifies a separate mandate. The portfolio is therefore permitted to amount to a maximum of and endeavouring to achieve diversification between different financ- 24 20 per cent (20) of the total portfolio. At the turn of the year, long-term ing arrangements and markets. The Group’s extremely high creditwor- 25 bonds totalling SEK 4,778 million (3,611) were issued, equivalent to thiness allows a diversified supply of credit through the public financ- 14.07 per cent (11.22) of the total portfolio. ing programmes. 26 Index-linked bond portfolio – bonds linked to the real interest rate, According to the maturity mandate, a maximum of 45 per cent (50) 27 must not exceed 10 per cent (10) of the total portfolio. At the turn of the may fall due for refinancing within a 12-month period. Unutilised credit facilities should be in place to guarantee good pay- 28 year, index-linked bonds totalling SEK 900 million (900) were issued, equivalent to 2.65 per cent (2.8) of the total portfolio. ment capacity. 29 Basic portfolio – consists of the remaining portion of commercial The Group’s cash and bank balances at the end of 2016 totalled SEK 30 paper, bonds and interest rate derivatives. The portfolio is managed 6,479 million (5,370). At the year-end, bank facilities granted totalled within an average fixed interest period mandate. The current mandate SEK 3,000 million (3,000). 31 is a fixed interest period of 3 to 6 years (2 to 6 years). The fixed interest FACILITIES AND RATING 32 period at the year-end was 4.5 years (4.69), including interest derivatives. 33 Rating Utilised, MATURITY STRUCTURE FOR FIXED INTEREST PERIODS Standard & Rating Framework nominal AND LIABILITY MATURITY, SEK M 34 Poor’s Moody’s 31-12-2017 31-12-2017 35 Committed credit Fixed interest, Maturity, facilities in bank SEK 3000 m — 36 SEK m SEK m Commercial paper A1+/K1 SEK 4,000 m — 37 2018:1 1,865 13,535 2018:2 –517 –517 ECP (Euro 38 Commercial Paper) A1+ P-1 EUR 1,200 m EUR 496 m 2018:3 2,313 300 39 MTN (Medium 2018:4 — — Term Note)1 AA SEK 8,000 m SEK 770 m 40 2019 2,420 1,884 EMTN (Euro 41 2020 2,370 1,950 Medium Term Note) AA/A1+ EUR 3,000 m EUR 2,811 m

42 2021 5,045 2,600 1) Not updated since 2009. 43 2022 1,000 2,200 2023 426 200 The following table shows the remaining contractual term for the Group’s financial liabilities. The liquidity flows are not discounted 2024 200 500 and foreign flows have been translated at the rate on the closing date. 2025 and later 13,300 5,770 For those instruments where the future variable rate of interest is TOTAL 28,422 28,422 unknown, the rate of interest has been calculated with the aid of the implicit forward interest rates for the yield curve on the closing date. The table above shows the nominal amounts. The nominal amounts Use is made primarily of rental revenue to meet the obligations have been recalculated at the year-end rate. As all loans raised in a for- linked to the Group’s financial liabilities presented in the table on the eign currency are swapped to Swedish kronor, the exchange rate effect next page. The rental revenue falls due for payment quarterly and is is neutralised. A positive figure means that the Group pays interest and subject to long agreement terms. The credit risk associated with rental a negative figure means that the Group receives interest. revenue is considered low.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Notes 93

LIQUIDITY RISK, SEK M CREDIT RISK AND COUNTER-PARTY RISK 1 The risk of a loss if a counter-party does not meet its undertakings. Current The Group is exposed when surplus liquidity is placed in financial 2 Hedged Derivative Deriva- invest- assets and in conjunction with changes in the value of derivatives. The 3 Loans loans insurance tives ments Total Risk Plan includes a limit system where permitted exposure depends 4 2018 –2,203 –7,789 667 –32 5,955 –3,402 on the counter-party’s credit rating or ownership and the term of the 2019 –2,320 –111 –356 –20 — –2,807 involvement. The limits are related to the Group’s risk capacity in the 5 2020 –2,659 –112 9 19 — –2,743 form of equity. In addition, investments should be characterised by 6 good liquidity in the secondary market. 2021 –2,461 –3,166 197 26 — –5,404 The Group’s policy is that internationally standardised netting 7 2022 –244 –48 –1,086 45 — –1,333 agreements, ISDA agreements, should always be signed with a counter- 8 2023 –244 –452 –108 12 — –792 party before uncleared derivative transactions take place. As at 9 2024 –444 –37 –111 27 — –565 31 December 2017, the total counter-party exposure in derivatives (calculated as the net claim per counter-party) stood at SEK 815 mil- 10 2025 and lion (1,508). With the aim of reducing exposure to a counter-party risk, later –11,074 –5,079 –1,344 37 — –17,4 60 11 the Group has entered into a number of supplementary agreements, TOTAL –21,649 –16,794 –2,132 114 5,955 –34,506 Credit Support Annexes (CSA), to the ISDA agreements. The agree- 12 ments mean that the parties mutually undertake to make collateral 13 Positive value = payments received, negative value = payments made. available in the form of cash and cash equivalents or bonds for the undervalues in outstanding derivative contracts. At the year-end, 14 the Group had received SEK 629 million (1,631) net. 15

16 The table below shows financial assets and liabilities (derivatives) that are not offset in the balance sheet, but are covered by framework agreements 17 for netting or similar agreements: 18

Amounts that are not offset, but are covered by Amounts that are not offset, but are covered by 19 framework agreements for netting or similar agreements framework agreements for netting or similar agreements 20 31-12-2017 31-12-2016 21 Reported Reported financial assets/ Cash collateral financial assets/ Cash collateral 22 liabilities gross received Net amount liabilities gross received Net amount 23 ASSETS Derivatives 1,651,114 –8 57,982 793,131 2,386,932 –1,762,042 624,890 24 TOTAL 1,651,114 –857,982 793,131 2,386,932 –1,762,042 624,890 25 26

LIABILITIES 27 Derivatives 1,003,989 –231,144 772,845 690,426 –131,164 559,262 28 TOTAL 1,003,989 –231,144 772,845 690,426 –131,164 559,262 29

30 The table below shows the Group’s exposure to counter-party risks ELECTRICITY PRICE RISK divided according to different rating categories: The risk approach and mandate for handling the electricity price risk 31 is governed by the guidelines for purchasing electricity. The term ‘elec- 32 COUNTER-PARTY RISK, EXCLUDING RENT RECEIVABLES, SEK M tricity price risk’ refers to the risk that the future price of electricity 33 will affect the Group’s operating costs negatively and with low predict- Collateral ability. With the aim of reducing exposure to changes in the electricity 34 received/ Net price, different financial price-hedging instruments are used (electric- 35 Receivable Liability granted exposure ity derivatives). The Group stipulates a long-term price hedging strat- INSTITUTIONS WITH egy. Trade in physical electric power (spot) and financial price-hedging 36 A LONG RATING instruments takes place through Nord Pool. To limit the counter-party 37 AA–/Aa3 73 –16 49 8 risk, all financial trading is cleared through third party against which 38 A+/A1 160 –94 –94 160 Akademiska Hus pledges and receives security, depending on whether the derivative position has a positive or negative value. 39 A/A2 510 –62 558 –110 40 A–/A3 555 –12 — 543 CREDIT RISK ATTRIBUTABLE TO RENT RECEIVABLES BBB+/Baa1 220 –119 116 –15 A large proportion of the Group’s receivables are rent receivables. 41 INSTITUTIONS WITH The maximum credit risk exposure for rent receivables and accounts 42 ONLY A SHORT RATING receivable is equal to their carrying amounts. However, the assessed 43 K-1 700 — — 700 credit risk in rent receivables is low in the light of the high credit rating of the tenants. Companies wholly owned by the Swedish state 3,891 — — 3,891 RISK CONTROL Ongoing work is being done to improve the level of expertise, routines Companies partly owned by the and internal control. There is strict allocation of responsibility between Swedish state 100 — — 100 the Treasury and Risk Control. The unit handles accounting and TOTAL 6,209 –303 629 5,277 administration as well as compliance with the mandates. The task of developing and refining analytical support and risk control is ongoing.

Positive figure = Group receivable, negative figure = Group liability.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 94 Notes

1 35 Asset management (Group) 37 Contingent liabilities 2 The Group strives to achieve good growth in profit, financial sustaina- Group Parent Company 3 bility and financial capacity. The financial objectives are set to provide 31-12-2017 31-12-2016 31-12-2017 31-12-2016 4 a combination of a high return on equity, high growth capacity and Contingent liability, financial stability. PRI 4,564 4,332 4,564 4,332 5 According to the owner’s financial targets for Akademiska Hus, the TOTAL 4,564 4,332 4,564 4,332 6 dividend should amount to between 40 and 60 per cent of the net profit after tax after reversal of changes in fair value and related deferred tax. 7 When deciding on a dividend, consideration should be given to the 38 Adjustments for items 8 Group’s capital structure and capital requirements (equity ratio 30 per not included in cash flow 9 cent to 40 per cent). The other financial targets are that the equity ratio should be Group Parent Company 10 between 30 and 40 per cent and that the return on operating capital 2017 2016 2017 2016 11 should be at least 6.5 per cent. At the end of 2017, the equity ratio was 43.3 per cent (41.4) for the Depreciation, etc 3,932 5,518 1,159,923 1,040,307 12 Group and 19.0 per cent (19.1) for the Parent Company. After the divi- Change in value, 13 dend of SEK 1,630 million proposed by the Board of Directors, the properties –5,080,536 –3,722,328 — — equity ratio will be 42.2 per cent for the Group and 16.5 per cent for Capital gain (–)/loss 14 the Parent Company. (+) on sale of tangible, 15 Financing operations are described in the Financing section in non-current assets — –35,257 –168,627 –23,849 16 the Administration Report, Note 28 Loans and Note 34 Financial risk Changes in value, management. financial instruments 312,945 –424,077 312,945 –424,077 17 The Group’s capital structure comprises an interest-bearing net Cash flow hedge –3,607 52,575 –3,607 52,575 18 loan liability and equity attributable to the Parent Company’s share- Change in pension holder (share capital, other contributed capital, retained earnings, provisions and similar 19 including profit for the year). commitments 25,063 17,493 7,58 5 10,683 20 Other — — — — The Group’s capital is as follows: 21 TOTAL –4,742,203 –4,106,076 1,308,219 655,639 22 31-12-2017 31-12-2016 23 Loans from financing programmes (Note 28) 34,739,653 32,756,563 24 39 Purchase sum in conjunction with Collateral received for derivative investments, acquisitions and disposals 25 transactions entered into (Note 30) 8 57,982 1,762,042 26 Financial derivatives (Note 20) – 6 47,125 –1,696,506 For investments and acquisitions for the period, a total of KSEK 2,555,667 (2,763,607) has been paid, of which KSEK 2,555,667 27 Cash and cash equivalents (Note 26) –6,479,484 –5,369,617 was paid in cash and cash equivalents. The Parent Company also 28 INTEREST-BEARING invested KSEK 0 (0) in shares in subsidiaries. For disposals for the NET LOAN LIABILITY 28,471,026 27,452,482 29 period, a total of KSEK 203,750 (103,072) has been received, of which KSEK 203,750 was received in cash and cash equivalents. 30 EQUITY 39,186,212 34,151,677 31 40 Reconciliation of liabilities attributable 32 to financing activities

33 36 Pledged assets Opening liabilities for interest-bearing liabilities including derivatives 34 Group Parent Company in the Group total SEK 33,447 million. Closing balance totals SEK 35,744 million, corresponding to an increase of SEK 2,297 million. 35 31-12-2017 31-12-2016 31-12-2017 31-12-2016 This increase consists of a positive cash flow of SEK 2,723 million from 36 Blocked bank funds 64,148 297,756 64,148 297,756 financing activities and changes that do not affect cash flow of SEK Current investments 231,144 131,164 231,144 131,164 37 –426 million relating to amortisation of premiums/discounts, TOTAL 295,292 428,920 295,292 428,920 exchange rates and fair value. 38 The equivalent also applies for the Parent Company. 39 Unsettled results from transactions as well as standardised computed 40 safety margins using exchange-cleared derivatives have been secured 41 through blocked bank funds. Pledged assets have decreased by SEK 134 million. The Group also 42 received collateral of SEK 858 million, see Note 34. 43

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Notes 95

41 Change in interest-bearing 42 Transactions with related parties 1 net loan liabilities 2 In conjunction with intra-Group purchases and sales, the same pricing Group Parent Company principles are applied as would have been the case in transactions with 3 31-12-2017 31-12-2016 31-12-2017 31-12-2016 an external party. Intra-Group property purchases and sales take place 4 subject to a fiscal residual value. Purchases and sales of other current Opening amount 26,962,415 23,923,104 26,962,583 23,923,272 assets take place at the carrying amount. There were no transactions 5 Increase (–)/ with the President, Board of Directors or senior executives, apart from 6 Decrease (+) in salary and other remuneration, see Note 10. interest-bearing 7 receivables 736,344 –478,875 736,344 –478,875 Transactions with Group companies are shown in the table below. 8 Increase (–)/ Decrease (+) in Group Parent Company 9 current investments –656,682 –2,378,588 –656,682 –2,378,588 2017 2016 2017 2016 10 Increase (–)/ Income Decrease (+) in cash 11 Companies within the and cash equivalents –453,186 1,254,956 –453,186 1,254,956 Akademiska Hus Group — — — 12 Increase (–)/ TOTAL — — — — Decrease (+) in 13 current receivables –365,183 30,564 –365,183 30,564 14 Increase (+)/ Liabilities 15 Decrease (–) in Companies within the interest-bearing Akademiska Hus Group — — 2,153 2,153 16 liabilities 1,345,101 4,611,254 1,345,101 4,611,254 TOTAL 2,153 2,153 17 Increase (+)/ Decrease (–) in 18 interest-bearing liabilities, addition 19 following merger — — — — 43 Events after the year-end 20 CHANGE IN INTEREST-BEARING There were no events of a material nature after the end of the reporting 21 NET LOAN period. 22 LIABILITIES 606,394 3,039,311 606,394 3,039,311 23

AMOUNT AT 24 THE YEAR-END 27,568,809 26,962,415 27,568,977 26,962,583 25

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 96 Signing of the Annual Report

Certification

The Board of Directors and the President hereby certify that the Annual national Financial Reporting Standards (IFRS), as endorsed by the Report has been prepared in accordance with the Annual Accounts Act EU, and provide a fair picture of the Group’s position and results and and RFR 2 and provides a fair picture of the Company’s position and that the Administration Report for the Group provides a fair overview results and that the Administration Report provides a fair overview of the development of the Group’s operations, position and results and of the development of the Group’s operations, position and results and describes material risks and uncertainties facing the companies that describes material risks and uncertainties facing the Company. form part of the Group. The Board of Directors and the President hereby certify that the The Sustainability Report for 2017 has been approved for publica- Consolidated Accounts have been prepared in accordance with Inter- tion by the Board of Directors and the CEO.

Gothenburg, 14 March 2018

Anitra Steen Caroline Arehult Britta Burreau Chairman Board member Board member

Kristina Ekengren Peter Gudmundson Thomas Jennlinger Board member Board member Employee representative

Anders Larsson Christer Nerlich Gunnar Svedberg Employee representative Board member Board member

Örjan Wikforss Ingemar Ziegler Kerstin Lindberg Göransson Board member Board member President

Our Audit Report was submitted on 16 March 2018.

KPMG AB Björn Flink Authorised Public Accountant

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Auditor’s Report 97

Auditor’s Report To the general meeting of the shareholders of Akademiska Hus AB, corp. id 556459-9156

Report on the annual accounts and consolidated accounts

OPINIONS BASIS FOR OPINIONS We have audited the annual accounts and consolidated accounts We conducted our audit in accordance with International Stand- of Akademiska Hus AB for the year 2017, except for the corporate ards on Auditing (ISA) and generally accepted auditing standards governance statement on pages 46–53. The annual accounts and in Sweden. Our responsibilities under those standards are further consolidated accounts of the company are included on pages 34–95 described in the Auditor’s Responsibilities section. We are inde- in this document. pendent of the parent company and the group in accordance with In our opinion, the annual accounts have been prepared in professional ethics for accountants in Sweden and have otherwise accordance with the Annual Accounts Act, and present fairly, in all fulfilled our ethical responsibilities in accordance with these material respects, the financial position of the parent company as requirements.This includes that, based on the best of our knowl- of 31 December 2017 and its financial performance and cash flow edge and belief, no prohibited services referred to in the Audit Reg- for the year then ended in accordance with the Annual Accounts ulation (537/2014) Article 5.1 have been provided to the audited Act. The consolidated accounts have been prepared in accordance company or, where applicable, its parent company or its controlled with the Annual Accounts Act and present fairly, in all material companies within the EU. respects, the financial position of the group as of 31 December 2017 We believe that the audit evidence we have obtained is sufficient and their financial performance and cash flow for the year then and appropriate to provide a basis for our opinions. ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts KEY AUDIT MATTERS Act. Our opinions do not cover the corporate governance statement Key audit matters of the audit are those matters that, in our profes- on pages 46–53. The statutory administration report is consistent sional judgment, were of most significance in our audit of the annual with the other parts of the annual accounts and consolidated accounts and consolidated accounts of the current period. These accounts. matters were addressed in the context of our audit of, and in form- We therefore recommend that the general meeting of share- ing our opinion thereon, the annual accounts and consolidated holders adopts the income statement and balance sheet for the par- accounts as a whole, but we do not provide a separate opinion on ent company and the group. these matters. Our opinions in this report on the the annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the parent company’s audit committee in accordance with the Audit Regulation (537/2014) Article 11.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 98 Auditor’s Report

VALUATION OF INVESTMENT PROPERTY See note 2 General accounting priciples, note 16 Properties (Group) and note 17 Properties (Parent Company) on pages 69, 82 and 84 respectively in the annual accounts and consolidated accounts for detailed information and description of the matter. Description of key audit matter Response in the audit

Investment property is held at fair value in the consolidated We have considered if the valuation methods used are reasonable by accounts. comparing them with our experience from methods used by other As per 31 December 2017 Investment property amounts to property companies and external property appraisers and those MSEK 80,444, which is approximately 90 % of total consolidated assumptions and prerequisites normally used in investment prop- assets. Accounting for investment property at fair value requires erty valuations. significant judgements and estimates of future events. Fair value We have assessed the expertise of the internal valuation organi- has been determined through internal valuations. In addition, in zation. order to validate reliability in valuations, external valuations have We have taken part of and assessed the relevance of the informa- been obtained for a selection of properties held by the group. tion gathered by the Company from external sources to support sig- Given the significant share of total consolidated assets and the nificant assumptions and preconditions in valuation models used. significant judgements and estimates of future events required We have tested controls established by the Company to ensure when valuing investment property we consider valuation of invest- that input data to internal valuations are accurate and complete. ment property as a key audit matter in our audit. We have, on sample basis, tested property valuations. In doing so, The risk is that fair value of investment property could be over- we used market data derived from external sources in order to chal- or underestimated and that any adjustment to fair value would lenge significant assumptions and estimates used, in particular on directly affect the periods’ result. yields and imputed rates of interest. We have checked the accuracy of disclosures on investment property given in the notes to the annual report, in particular on significant assumptions and key estimates used.

OTHER INFORMATION THAN THE ANNUAL accounts, in accordance with IFRS as adopted by the EU. The ACCOUNTS AND CONSOLIDATED ACCOUNTS Board of Directors and the Managing Director are also responsible This document also contains other information than the annual for such internal control as they determine is necessary to enable accounts and consolidated accounts and is found on pages 5, 11, 13, the preparation of annual accounts and consolidated accounts that 16–22, 26–28, 31–33 and 107–108. The Board of Directors and the are free from material misstatement, whether due to fraud or error. Managing Director are responsible for this other information. In preparing the annual accounts and consolidated accounts Our opinion on the annual accounts and consolidated accounts The Board of Directors and the Managing Director are responsible does not cover this other information and we do not express any for the assessment of the company’s and the group’s ability to conform of assurance conclusion regarding this other information. tinue as a going concern. They disclose, as applicable, matters In connection with our audit of the annual accounts and consol- related to going concern and using the going concern basis of idated accounts, our responsibility is to read the information iden- accounting. The going concern basis of accounting is however not tified above and consider whether the information is materially applied if the Board of Directors and the Managing Director intend inconsistent with the annual accounts and consolidated accounts. to liquidate the company, to cease operations, or has no realistic In this procedure we also take into account our knowledge other- alternative but to do so. wise obtained in the audit and assess whether the information The Audit Committee shall, without prejudice to the Board of otherwise appears to be materially misstated. Director’s responsibilities and tasks in general, among other things If we, based on the work performed concerning this informa- oversee the company’s financial reporting process. tion, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing AUDITOR’S RESPONSIBILITY to report in this regard. Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free RESPONSIBILITIES OF THE BOARD OF DIRECTORS from material misstatement, whether due to fraud or error, and to AND THE MANAGING DIRECTOR issue an auditor’s report that includes our opinions. Reasonable The Board of Directors and the Managing Director are responsible assurance is a high level of assurance, but is not a guarantee that an for the preparation of the annual accounts and consolidated audit conducted in accordance with ISAs and generally accepted accounts and that they give a fair presentation in accordance with auditing standards in Sweden will always detect a material mis- the Annual Accounts Act and, concerning the consolidated statement when it exists. Misstatements can arise from fraud or

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS Auditor’s Report 99

error and are considered material if, individually or in the aggre- consolidated accounts or, if such disclosures are inadequate, gate, they could reasonably be expected to influence the economic to modify our opinion about the annual accounts and consoli- decisions of users taken on the basis of these annual accounts and dated accounts. Our conclusions are based on the audit evi- consolidated accounts. dence obtained up to the date of our auditor’s report. However, As part of an audit in accordance with ISAs, we exercise profes- future events or conditions may cause a company and a group sional judgment and maintain professional scepticism throughout to cease to continue as a going concern. the audit. We also: • Evaluate the overall presentation, structure and content of • Identify and assess the risks of material misstatement of the the annual accounts and consolidated accounts, including the annual accounts and consolidated accounts, whether due to disclosures, and whether the annual accounts and consoli- fraud or error, design and perform audit procedures respon- dated accounts represent the underlying transactions and sive to those risks, and obtain audit evidence that is sufficient events in a manner that achieves fair presentation. and appropriate to provide a basis for our opinions. The risk of • Obtain sufficient and appropriate audit evidence regarding the not detecting a material misstatement resulting from fraud is financial information of the entities or business activities higher than for one resulting from error, as fraud may involve within the group to express an opinion on the consolidated collusion, forgery, intentional omissions, misrepresentations, accounts. We are responsible for the direction, supervision or the override of internal control. and performance of the group audit. We remain solely respon- • Obtain an understanding of the company’s internal control sible for our opinions. relevant to our audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose We must inform the Board of Directors of, among other matters, of expressing an opinion on the effectiveness of the company’s the planned scope and timing of the audit. We must also inform internal control. of significant audit findings during our audit, including any signifi- • Evaluate the appropriateness of accounting policies used and cant deficiencies in internal control that we identified. the reasonableness of accounting estimates and related dis- We must also provide the Board of Directors with a statement closures made by the Board of Directors and the Managing that we have complied with relevant ethical requirements regard- Director. ing independence, and to communicate with them all relationships • Conclude on the appropriateness of the Board of Directors’ and other matters that may reasonably be thought to bear on our and the Managing Director’s, use of the going concern basis independence, and where applicable, related safeguards. of accounting in preparing the annual accounts and consoli- From the matters communicated with the Board of Directors, dated accounts. We also draw a conclusion, based on the audit we determine those matters that were of most significance in the evidence obtained, as to whether any material uncertainty audit of the annual accounts and consolidated accounts, including exists related to events or conditions that may cast significant the most important assessed risks for material misstatement, and doubt on the company’s and the group’s ability to continue are therefore the key audit matters. We describe these matters in as a going concern. If we conclude that a material uncertainty the auditor’s report unless law or regulation precludes disclosure exists, we are required to draw attention in our auditor’s about the matter. report to the related disclosures in the annual accounts and

Report on other legal and regulatory requirements

OPINIONS BASIS FOR OPINIONS In addition to our audit of the annual accounts and consolidated We conducted the audit in accordance with generally accepted accounts, we have also audited the administration of the Board of auditing standards in Sweden. Our responsibilities under those Directors and the Managing Director of Akademiska Hus AB for standards are further described in the Auditor’s Responsibilities the year 2017 and the proposed appropriations of the company’s section. We are independent of the parent company and the group profit or loss. in accordance with professional ethics for accountants in Sweden We recommend to the general meeting of shareholders that the and have otherwise fulfilled our ethical responsibilities in accord- profit be appropriated in accordance with the proposal in the statu- ance with these requirements. tory administration report and that the members of the Board of We believe that the audit evidence we have obtained is sufficient Directors and the Managing Director be discharged from liability and appropriate to provide a basis for our opinions. for the financial year.

AKADEMISKA HUS | ANNUAL REPORT 2017 FINANCIAL STATEMENTS 100 Auditor’s Report

RESPONSIBILITIES OF THE BOARD OF DIRECTORS the company’s profit or loss is based primarily on the audit of the AND THE MANAGING DIRECTOR accounts. Additional audit procedures performed are based on our The Board of Directors is responsible for the proposal for appropri- professional judgment with starting point in risk and materiality. ations of the company’s profit or loss. At the proposal of a dividend, This means that we focus the examination on such actions, areas this includes an assessment of whether the dividend is justifiable and relationships that are material for the operations and where considering the requirements which the company’s and the group’s deviations and violations would have particular importance for the type of operations, size and risks place on the size of the parent company’s situation. We examine and test decisions undertaken, company’s and the group’s equity, consolidation requirements, support for decisions, actions taken and other circumstances that liquidity and position in general. are relevant to our opinion concerning discharge from liability. The Board of Directors is responsible for the company’s organi- As a basis for our opinion on the Board of Directors’ proposed zation and the administration of the company’s affairs. This appropriations of the company’s profit or loss we examined the includes among other things continuous assessment of the compa- Board of Directors’ reasoned statement and a selection of support- ny’s and the group’s financial situation and ensuring that the coming evidence in order to be able to assess whether the proposal is pany’s organization is designed so that the accounting, manage- in accordance with the Companies Act. ment of assets and the company’s financial affairs otherwise are controlled in a reassuring manner. THE AUDITOR’S EXAMINATION OF The Managing Director shall manage the ongoing administra- THE CORPORATE GOVERNANCE STATEMENT tion according to the Board of Directors’ guidelines and instruc- The Board of Directors is responsible for that the corporate gov- tions and among other matters take measures that are necessary to ernance statement on pages 46–53 has been prepared in accord- fulfill the company’s accounting in accordance with law and handle ance with the Annual Accounts Act. the management of assets in a reassuring manner. Our examination of the corporate governance statement is conducted in accordance with FAR´s auditing standard RevU 16 AUDITOR’S RESPONSIBILITY The auditor´s examination of the corporate governance statement. Our objective concerning the audit of the administration, and This means that our examination of the corporate governance thereby our opinion about discharge from liability, is to obtain statement is different and substantially less in scope than an audit audit evidence to assess with a reasonable degree of assurance conducted in accordance with International Standards on Audit- whether any member of the Board of Directors or the Managing ing and generally accepted auditing standards in Sweden. We Director in any material respect: believe that the examination has provided us with sufficient basis • has undertaken any action or been guilty of any omission for our opinions. which can give rise to liability to the company, or A corporate governance statement has been prepared. Disclo- • in any other way has acted in contravention of the Companies sures in accordance with chapter 6 section 6 the second paragraph Act, the Annual Accounts Act or the Articles of Association. points 2–6 of the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the other parts Our objective concerning the audit of the proposed appropriations of the annual accounts and consolidated accounts and are in of the company’s profit or loss, and thereby our opinion about this, accordance with the Annual Accounts Act. is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act. KPMG AB, Box 3018, 169 03, Solna, was appointed auditor of Reasonable assurance is a high level of assurance, but is not a Akademiska Hus AB by the general meeting of the shareholders guarantee that an audit conducted in accordance with generally on April 28th 2014. KPMG AB or auditors operating at KPMG AB accepted auditing standards in Sweden will always detect actions have been the company’s auditor since 2014. or omissions that can give rise to liability to the company, or that Gothenburg 16 March 2018 the proposed appropriations of the company’s profit or loss are not in accordance with the Companies Act. As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judgment and KPMG AB maintain professional scepticism throughout the audit. The exam- Björn Flink ination of the administration and the proposed appropriations of Authorized Public Accountant

AKADEMISKA HUS | ANNUAL REPORT 2017 SUSTAINABILITY REPORT 101

AKADEMISKA HUS | ANNUALCampus REPORT Ultuna, 2017 Uppsala SUSTAINABILITY REPORT 102 GRI data

About the Sustainability Report

Akademiska Hus’ sustainability report is an integral part of the annual report and follows the Global Reporting Initiative (GRI) guidelines, GRI G4, and the GRI’s Construction and Real Estate Sector Supple- ment. The report is in accordance with the “Core” option. KPMG has reviewed and certified the sustainability report.

Since 2013 Akademiska Hus has supported the UN Global Compact ini- includes Akademiska Hus’ statutory sustainability report in accord- tiative and thus takes a stand and accepts responsibility for ten recog- ance with chapter 6 of the Swedish Annual Accounts Act. The cross- nised principles relating to human rights, labour rights, the environ- reference table presents a summary of the GRI indicators that are ment and anti-corruption issues. The principles are based on the UN reported and page references to the respective indicator and COP. Universal Declaration of Human Rights, the ILO Declaration on Fun- A summary of the trade organisations of which the Company is a damental Principles and Rights at Work, the OECD Guidelines for Mul- member can be found at akademiskahus.se. tinational Enterprises, and the Rio Declaration. The Annual Report and the Sustainability Report also serve as Akademiska Hus’ Commu- nication on Progress (COP) for reporting work to the Global Compact. The Sustainability Report of Akademiska Hus covers the financial year and is published annually. The most recent report was published on 24 March 2017. Akademiska Hus presents its sustainability work based on the Company’s main processes, with the focus on those areas that are considered most important. No significant changes have taken place in the business during the accounting period. The data presented Contact cover the financial year 2017, from 1 January to 31 December, and Mia Edofsson applies to Akademiska Hus as a Group. Sustainability Manager [email protected] The sustainability report includes pages 2–3, 6–10, 12, 14–15, 23–25, 29–30, 42–45, 52–53 and 102–106. The sustainability report also

GRI data

The following information about the GRI indicators is not presented G4-20-21: ASPECT AND BOUNDARIES WITHIN anywhere else in the Annual Report. AND OUTSIDE THE ORGANISATION

G4-10: TOTAL WORKFORCE BY EMPLOYMENT TYPE, Material aspect GRI aspect Boundary EMPLOYMENT CONTRACT, REGION AND GENDER Efficient use of Energy Own operations and supply As at 31 December 2017 Akademiska Hus employs a total of 466 people, resources Emissions chain and customers all of whom are permanently employed, with the exception of ten peo- A safe working Occupational Health Own operations and supply ple who are on trial contracts. Nineteen people have part-time jobs. environment and safety chain Good supplier Supplier Environmental Supply chain Distribution of men and women, by region: management Assessment regarding Gender the environment and working conditions Women Men Total High transparency Anti-corruption Own operations and Staff and operational support 71 52 123 and effective anti- customers Campus and business development 11 8 19 corruption programme Property Management 45 237 282 Diversity Diversity and equal Own operations opportunity Projects 13 29 42 Total 140 326 466 In addition to these essential areas we see collaboration regarding 30% 70% 100% innovation, campus development and student accommodation as important issues for our business. Read more on page 9.

AKADEMISKA HUS | ANNUAL REPORT 2017 SUSTAINABILITY REPORT GRI data 103

G4-EC1: DIRECT ECONOMIC VALUE GENERATED G4-CRE3: GREENHOUSE GAS EMISSION AND DISTRIBUTED LEVELS FROM PROPERTIES Economic stakeholder relations Greenhouse gas emissions levels from Akademiska Hus properties was 7.0 kg of CO2/m² (7.7 kg CO2/m²). Direct economic value generated G4-LA6: WORK-RELATED INJURIES AND ILLNESSES Income 5,806 Work-related injuries and illnesses are reported in the systems Economic value distributed “AkaÄrende” and AFA’s Informationssystem Arbetsmiljö (IA). Payments to suppliers –1,658 During the year a total of 24 work-related injuries were reported for Employee wages and benefits –249 Akademiska Hus personnel. These injuries included 7 driving accidents Fees and remuneration to the Board and CEO –12 and 3 work-related illnesses as a result of stress. The most common type of occupational injury for employees include driving accidents (7), Social security costs –125 fall accidents (6) and stress (3). Interest paid to lenders, net –532 During the same period, 62 injuries were reported for contractors Dividends to shareholders –1,393 involved in our management and construction projects. The most com- Economic value retained 1,837 mon type of occupational injuries for contractors included lacerations, puncture wounds or crush injuries (18), fall accidents (14) and materials that collapsed, fell or broke (7). Other key figures for the EC-1 indicator can be found in: LA-5 Representation on health and safety committees 47 employ- Income Statement page 56 ees (10 per cent) är committed i Health and safety committees. Allocation of unappropriated earnings page 55 Staff note Note 10, pages 77–78. G4-LA12: DIVERSITY WITHIN THE ORGANISATION As at 31 December 2017, Akademiska Hus employees included 30 per G4-EN3: ENERGY CONSUMPTION cent women and 70 per cent men. WITHIN THE ORGANISATION MWh 2017 2016 Age and gender: Total energy consumption (energy 2017 that is neither renewable nor recovered) 48,773 92,416 Number of Number of Total energy consumption Composition of the company Number women men (renewable or recovered energy) 730,842 691,582 Board of Directors Total electricity 381,601 387,329 Under 30 years including energy charges passed on to tenant 270,936 269,863 30–50 years 2 2 Total heating 307,389 306,208 Over 50 years 9 2 7 including energy charges passed on to tenant 83,718 106,048 Executive Management Total cooling 74,103 73,447 Under 30 years including energy charges passed on to tenant 64,188 68,162 30–50 years 6 1 5 Total steam 16,523 17,014 Over 50 years 4 4 — including energy charges passed on to tenant 9,586 11,253 Employees in managerial position1

Own electricity generation from renewables 2017 2016 Under 30 years 2 1 1 Solar electricity (MWh) 1,228 1,165 30–50 years 40 17 23 Over 50 years 26 5 21 Degree day method has been used for correction of heat. Other employees G4-EN6: REDUCTION OF ENERGY CONSUMPTION Under 30 years 25 6 19 30–50 years 197 71 126 2017 2016 Over 50 years 166 35 131 Total reduction (MWh) 4,383 19,496 1) Executive Management is reported separately

Invested (SEK) 186,360,175 130,233,675 The table shows the composition of the composition of the company by gender and age for different levels within the company. G4-EN16: ENERGY INDIRECT GREENHOUSE GAS EMISSIONS 1 Total CO2 emissions in 2017 amounted to 28,495 tons (29,162 tons).

1) All CO2-data in this summary is based on information from suppliers who report in accordance with current accounting standards. 2016 emission factors for heating were primarily used since emission factors for 2017 were not available at the time this report was prepared.

AKADEMISKA HUS | ANNUAL REPORT 2017 SUSTAINABILITY REPORT 104 GRI and COP index

GRI and COP index

Global Page or Compact Indicator Description reference Comment principle STRATEGY AND ANALYSIS G4-1 Statement from the President 2–3 ORGANISATION PROFILE G4-3 Organisation name Front cover G4-4 Brands, products, and services 1, 21 G4-5 Location of head office 108 G4-6 Number of countries in which the organisation operates 108 G4-7 Ownership structure and legal form 46 G4-8 Markets in which the organisation operates 32 G4-9 Scale of the reporting organisation Inside cover, 56, 77, 102

G4-10 Total workforce by employment type, employment contract, 102 Akademiska Hus reports the number of employees by 6 region and gender employment type, gender and operational unit. The Company also has a large number of temporary employees from staffing companies, but they are not reported because no data is available. Akademiska Hus has no significant variations in the number of employees over the year. G4-11 Proportion of the workforce covered by collective bargaining All employees are signed to the collective “Almega 3 agreements Fastigheter Salary Agreement” except for employees in business management positions. G4-12 Description of the organisation’s supply chain 8–10, 25, 29–30 G4-13 Significant changes during the reporting period No significant changes during the financial year. G4-14 Description of whether and how the organisation 44 Akademiska Hus works according to environmental follows the Precautionary Principle management system ISO 14001:2004.

G4-15 Externally developed economic, environmental and 102 social declarations, principles or other initiatives that the organisation supports or is affiliated with G4-16 Membership of organisations and/or national/international akademiskahus.se lobbying organisations (Sustainability/Sustainability partnerships) ESSENTIAL ASPECTS AND LIMITATIONS G4-17 Entities that are included in the organisation’s financial 85, 102 statements G4-18 Description of the process for defining report content 8–10 and aspect boundaries G4-19 Material aspects identified 8–10 G4-20 Aspect and boundaries within the organisation 102 G4-21 Aspect and boundaries outside the organisation 102 G4-22 Changes to the information provided in previous reports No significant changes have been made to information and the reasons for such changes submitted in the 2016 report. G4-23 Significant changes that have been made since the previous 102 reporting period COMMUNICATION AND STAKEHOLDERS G4-24 Stakeholder groups engaged by the organisation 8–10 G4-25 Principle for identifying and selecting stakeholders 8–10 G4-26 Approach to stakeholder engagement 8–10 G4-27 Important areas and issues that have been raised 8–10 in communication with stakeholders INFORMATION ON ACCOUNTING AND CONTROL G4-28 Reporting period 102 G4-29 Publication date for latest report 102 G4-30 Reporting cycle 102 G4-31 Contact for questions regarding the report and its content 102 G4-32 Report GRI Content Index according to the GRI reporting 102, 104– level Core and external assurance report 105, 106

AKADEMISKA HUS | ANNUAL REPORT 2017 SUSTAINABILITY REPORT GRI and COP index 105

Global Page or Compact Indicator Description reference Comment principle G4-33 Statement of the organisation’s policy and procedures 102, 106 for external assurance of reporting G4-34 Statement of the organisation’s corporate governance 46–53 ETHICS AND INTEGRITY G4-56 The organisation’s values, principles and ethical standards 25, 42 10 such as codes of conduct FINANCES DMA Economic Performance Inside cover, 6–7, 12 EC-1 Direct economic value generated and distributed 55–56, 76–78, 103 DMA Indirect economic impacts 1, 6–7, 23–25 EC-7 Investments in infrastructure and services for public benefit 23–30 ENVIRONMENT DMA Energy 12, 29–30 EN-3 Energy Consumption within the organisation 29–30, 103 Akademiska Hus reports on electricity, heating and cool- 7, 8 ing because these areas account for the dominant share of energy consumption. EN-6 Reduction of energy consumption 29–30, 103 Akademiska Hus reports on electricity, heating and cool- 8, 9 ing because these areas account for the dominant share of energy consumption. DMA Emissions 29–30 EN-16 Energy indirect greenhouse gas emissions (scope 2) 103 7, 8 CRE-3 Greenhouse gas emission levels from properties 103 DMA Supplier Environmental Assessment 25 EN-32 Number of new suppliers that have undergone 25 The information relates to the percentage of active 8 environmental inspection suppliers. DMA Occupational Health and safety 15, 25 LA-5 Representation on health and safety committees 103 LA-6 Work-related injuries and illnesses 14, 103 Akademiska Hus reports total figures for absence through sickness and injuries at work for the company as a whole. Work-related injuries and illnesses for contractors cannot be reported due to unavailability of data. DMA Diversity and equal opportunity 14, 25 LA-12 Diversity within the organisation 103 6 DMA Monitoring of suppliers’ working conditions 25 LA-14 Number of new suppliers that have undergone inspection 25 The information relates to the percentage of active of working conditions suppliers. DMA Anti-corruption 25, 42–45, 52–53 SO-5 Corruption incidents and action taken 52 10 DMA Product and Service labelling 8, 12 PR-5 Results from customer satisfaction surveys 12 CRE-8 Type and number of sustainability certificates, ratings 25 and scores for new construction

Human rights Consistently important issue throughout the value chain. 1, 2 Given high priority in efforts to establish accident-free workplaces. Child labour The Code of Conduct covers this principle, but this 5 area is not identified as one of the main risk areas for Akademiska Hus. Forced labour The Code of Conduct covers this principle, but this 4 area is not identified as one of the main risk areas for Akademiska Hus.

AKADEMISKA HUS | ANNUAL REPORT 2017 SUSTAINABILITY REPORT 106 Assurance Statement

Assurance Statement

Auditor’s Limited Assurance Report on Akademiska Hus AB (Publ.) utory Sustainability Report. A limited assurance engagement and an Sustainability Report and statement regarding the Statutory Sustainability examination according to RevR 12 is different and substantially less in Report scope than an audit conducted in accordance with International Stand- ards on Auditing and generally accepted auditing standards in Sweden. To Akademiska Hus AB (Publ.), corp. id 556459-9156 The firm applies ISQC 1 (International Standard on Quality Control) and accordingly maintains a comprehensive system of quality control INTRODUCTION including documented policies and procedures regarding compliance We have been engaged by the Board of Directors of Akademiska Hus with ethical requirements, professional standards and applicable legal to undertake a limited assurance engagement of Akademiska Hus AB and regulatory requirements. We are independent of Akademiska Hus (Publ.) Sustainability Report for the year 2017. Akademiska Hus has in accordance with professional ethics for accountants in Sweden and defined the scopes of the Sustainability Report and the Statutory Sus- have otherwise fulfilled our ethical responsibilities in accordance with tainability Report on page 102 in this document. these requirements. The limited assurance procedures performed and the examination RESPONSIBILITIES OF THE BOARD OF DIRECTORS according to RevR 12 do not enable us to obtain assurance that we AND THE EXECUTIVE MANAGEMENT would become aware of all significant matters that might be identified The Board of Directors and the Executive Management are responsible in an audit. The conclusion based on a limited assurance engagement for the preparation of the Sustainability Report including the Statutory and an examination according to RevR 12 does not provide the same Sustainability Report in accordance with applicable criteria and the level of assurance as a conclusion based on an audit. Annual Accounts Act respectively. The criteria are defined on page 102 Our procedures are based on the criteria defined by the Board of in the Sustainability Report, and are part of the Sustainability Report- Directors and Executive Management as described above. We consider ing Guidelines published by GRI (The Global Reporting Initiative), that these criteria suitable for the preparation of the Sustainability Report. are applicable to the Sustainability Report, as well as the accounting We believe that the evidence obtained is sufficient and appropriate and calculation principles that the Company has developed. This to provide a basis for our conclusions below. responsibility also includes the internal control relevant to the preparation of a Sustainability Report that is free from material misstate- CONCLUSIONS ments, whether due to fraud or error. Based on the limited assurance procedures performed, nothing has come to our attention that causes us to believe that the Sustainability AUDITOR’S RESPONSIBILITY Report is not prepared, in all material respects, in accordance with the Our responsibility is to express a conclusion on the Sustainability criteria defined by the Board of Directors and Executive Management. Report based on the limited assurance procedures we have performed A Statutory Sustainability Report has been prepared. and to express an opinion regarding the Statutory Sustainability Report. We conducted our limited assurance engagement in accordance Gothenburg, 16 March 2018 with ISAE 3000 Assurance engagements other than audits or reviews of financial information. A limited assurance engagement consists of KPMG AB making inquiries, primarily of persons responsible for the preparation of the Sustainability Report, and applying analytical and other limited assurance procedures. Our examination regarding the Statutory Sustainability Report has been conducted in accordance with FAR:s Björn Flink Torbjörn Westman accounting standard RevR12 The auditor’s opinion regarding the Stat- Authorized Public Accountant Expert Member of FAR

AKADEMISKA HUS | ANNUAL REPORT 2017 KEY FIGURES 107

Key figures

ALTERNATIVE PERFORMANCE MEASURES

In accordance with European Securities and Markets Authority guidelines NET INTEREST INCOME AND EXPENSE, BREAKDOWN, SEK M (ESMA) on reporting of alternative performance measures, the definition and 01-01-2017– 01-01-2016– reconciliation of alternative performance measures for Akademiska Hus are SEK M 31-12-2017 31-12-2016 presented here. The guidelines entail additional disclosures regarding financial measures that are not defined in IFRS. The performance measures pre- Interest cost, net loans and financial assets –221 –233 sented below are reported in the interim report. They are used for internal Net interest derivatives –60 –133 governance and follow-up and are generally accepted in the property industry. Owner objectives have also been set for return on operating capital and Change in value, independent financial the equity ratio. Since not all companies calculate financial measures in the derivatives same way, these are not always comparable to measures used by other com- – unrealised –8 –18 panies. – realised –54 –217 Return on equity Changes in value, fair value hedges –181 –6 Profit before tax after 22 per cent tax rate in relation to average equity (IB+UB)/2. Other interest costs –8 –17 Capitalised interest expense, projects 101 75 Return on operating capital Earnings before changes in value and tax, excluding net interest income/ Reported net interest income expense in relation to average operating capital (IB+UB)/2. and expense –431 –549

Return on total assets Earnings before appropriations and taxes excluding financial expenses in Average interest-bearing capital relation to average Total equity and liabilities (IB+UB)/2. (full-year basis) –29,973 –28,104

Loan-to-value ratio Net investments Interest-bearing net loan debt in relation to the closing value of properties. Closing balance minus the opening balance for non-current assets plus depreciation and impairments minus revaluations. Yield Operating surplus in relation to the average fair value, excluding buildings Net loan liability under construction. Loans, derivatives, portion of current receivables and liabilities as well as This performance measure shows the return from operations in relation cash and cash equivalents. Pension provisions and similar items are not to the value of the properties. included. Net operating income ratio Net operating income in relation to property management income. 01-01-2017– 01-01-2016– The net operating income ratio shows how much the Company gets to keep SEK M 31-12-2017 31-12-2016 from each krona earned from business operations. It is a type of efficiency Loans –34,740 –32,757 measure that is comparable over time. Derivatives – liabilities –958 –690 Total financing cost including changes in value Collateral for derivatives –858 –1,762 Net interest and the change in value of financial derivatives, in relation to average interest-bearing capital. (Please see the table on the top right.) Cash and cash equivalents 6,479 5,369 Other current receivables 857 492 Interest coverage ratio Net operating income with the addition for central administration in relation Derivatives – receivables 1,651 2,386 to net financial income/expense, including period allocation of realised prof- Total net loan liability –27,569 –26,962 its from derivatives and including capitalised interest in projects. The interest coverage ratio is a financial measure that shows how many times the Company is able to pay its interest with adjusted earnings before Operating capital financial items. Equity plus interest-bearing net loan liability.

Period-allocated financing cost Interest-bearing liabilities Net interest income and expense in the form of the financing cost for loans, Interest-bearing loans, including pension provisions and similar items. net interest for financial derivatives and period allocation of realised profits on financial derivatives over the remaining term of the underlying instrument, Equity ratio in relation to average interest-bearing capital. (Please see the table on the Equity in relation to Total equity and liabilities. top right.) Total yield Internal financing ratio Direct yield from properties and their change in value, expressed in per cent. Cash flow from current operations before changes in working capital in relation to net investments.

AKADEMISKA HUS | ANNUAL REPORT 2017 108 DEFINITIONS, INFORMATION AND ADDRESSES

DEFINITIONS

Operating costs Floor space, m², GFS Operating costs are costs incurred to keep a property, installation or similar Gross floor space of building. Comprises rentable floor space as well as facility functioning. Operating costs are divided into media provision, moni- common areas and the areas surrounding the building. toring and service. Floor space, m² Property administration Rentable floor space in square metres. Cost of management, day-to-day accounting administration, leasing, contact with tenants, handling of registers, contracts and drawings, technical plan- Maintenance costs ning and follow-up and human resource administration. Costs for measures taken aimed at reinstating the original standardand function of worn or damaged parts of a building. Costs fortenant adaptations Rental revenue are also recognised here. The basic rent, index-linked, and estimated rent for vacant rentable floor space and supplements, with a deduction for vacant space and rent Rental and vacancy levels reductions. Leased or vacant floor space in relation to the total floor space. Financial leasing or vacant space levels are rental revenue for space leased and estimated rental revenue for vacant space in relation to the total rental revenue.

INFORMATION SCHEDULE FOR FURTHER INFORMATION, PLEASE CONTACT:

27 April 2018 Annual General Meeting Kerstin Lindberg Göransson, President 27 April 2018 Interim Report, January–March 2018 Telephone: +46 31 63 24 60 13 July 2018 Interim report April–June 2018 E-mail: [email protected] 26 October 2018 Interim Report, July–September 2018 February 2019 Year-end report 2018 Catarina Fritz, CFO March 2019 Annual Report 2018 Telephone: +46 31 63 24 81 E-mail: [email protected]

akademiskahus.se

ADDRESSES

HEAD OFFICE REGIONAL OFFICES

Akademiska Hus Akademiska Hus Lund Akademiska Hus Stockholm Akademiska Hus Umeå Box 483 Ole Römers väg 2 Box 1394 Box 7985 SE-401 27 Gothenburg SE-223 63 Lund SE-171 27 Solna SE-907 19 Umeå Street address: Stampgatan 14 Telephone: +46 46 31 13 00 Street address: Berzelius väg 8, vån 3–5 Street address: Artedigränd 2 Telephone: +46 31 63 24 00 Telephone: +46 8 685 75 00 Telephone: +46 90 17 62 00 akademiskahus.se [email protected] Akademiska Hus Linköping Akademiska Hus Uppsala Olaus Magnus väg 34 Villavägen 20 SE-583 30 Linköping SE-752 36 Uppsala Company registration number Telephone: +46 13 36 45 00 Street address: Artillerigatan 7 556459-9156 Telephone: +46 18 68 32 00

AKADEMISKA HUS | ANNUAL REPORT 2017 Produced by Akademiska Hus in cooperation with Intellecta Corporate Photos: Sebastian Lindberg (Cover), Jean-Baptiste Béranger (foldout, page 68), Ola Kjelbye (foldout, pages 8, 15, 19, 21, 22, Nordiska Miljömärkningen Svanen

29, 36), Anders Bryngel (page 21), Adam Mörk (page 24) Olof Holdar (pages 3, 49, 51) Åke E:son Lindman (page 4), press photo • Färgkod PMS 354, Fyrfärgskod C-91%, M-0,0%, Y-83%, K-0,0%. NORDIC ECOLABEL 3041 0250 • Standardfärger enligt SS 019100 – 019103 Blankt papper: 1080G10Y Matt papper: 354U-1070G Karlstad University (page 25), Akademiska Hus (sid 101) Drawings: Tengbom Arkitekter (page 18), White Arkitekter (pages NCS: 0879-G07Y NCS: 1368-G04Y • Miljömärket bör ej understiga 8 mm och ska minst ha den ECO storleken att texten ”MILJÖMÄRKT” och underliggande licensnummer C L är tydligt läsbara. 18, 20, 27), KUB Arkitekter (page 27), LINK Arkitektur (page 27), Berg Arkitektkontor/Arkitektfirmaet C.F. Møller (page 27), DI A B • När märket understiger 2 cm i diameter kan den förklarande undertexten R E utelämnas på produkten (Trycksak), om den finns med märket på förpackningen. O L Text på märket: Scheiwiller Svensson Arkitektkontor AB (page 16). Illustration: Robert Hanson (page 9) Printer: Göteborgstryckeriet N • Texten ”MILJÖMÄRKT” följer märkets rundade form på ovansidan.

• Texten ”MILJÖMÄRKT” med versaler och teckensnitt Helvetica, rak, halvfet. Teckentäthet och teckengrad anpassas till märkets storlek.

• Texten under märket ”Trycksak” skrivs horisontellt under siffergrupperna (341 000). The information in this Annual Report is such that Akademiska Hus (publ) is obliged to make public pursuant to the Swedish Teckensnitt helvetica, rak används med versal som begynnelsebokstav, f ö gemener, och anpassas i storlek till märket

• För tryckning på Svanen på andra nordiska språk studera Regelverket för Securities Market Act. The information was submitted for publication at 5:00 p.m. CET on 23 March 2018. nordisk miljömärkning. akademiskahus.se | [email protected]